The WTI crude oil price gained $1.50 a barrel yesterday with news about more rebel attacks on Shell facilities in Nigeria. There was also more speculation swirling around that OPEC will cut additional production at their March 15th meeting in Vienna, Austria. The up note in energy markets was contrary to the continued weakness in the equity markets, which were all dangerously close to forming fresh lows again yesterday.
Today the price for WTI crude oil shot up another $2 to over $44 a barrel after bearish Department of Energy inventory numbers were released. On the West Coast spot market gasoline and diesel prices jumped up another nickel per gallon today with increase in demand for gasoline and cold weather in the East driving both of those prices up.
The retail price of gasoline is leveling off in the U.S. but will be increasing in the next few weeks as refineries are switching to shipping the lower Reid Vapor Pressure summer gasoline to their terminals.
There is still a big disconnect between the price of crude oil as the refiners are now ruling the roost on what they will pay for their crude oil instead of the other way around. The equilibrium point will be reached when demand for gasoline starts equaling supply once again.
Various recent Energy Information Agency and Department of Energy reports are pointing to that already starting to happen. Speculators are no longer a factor in the oil markets and oil refiners are now operating strictly on a “What the market can pay” for their finished products rather than the other way around. That will allow them to get back to making a profit once again.
The news in Montana today was that due to poor economics another refinery project delayed will be delayed in the Rocky Mountains.
ConocoPhillips has announced that they pushed back plans to build a new crude unit and vacuum unit at the 61,000 barrel per day Billings, Montana, refinery by at least a year.
Construction was to have commenced in January 2009 with start-up planned for next year. A February 11th letter from ConocoPhillips to the Montana Department of Environmental Quality indicated that the work will not start until 2010, said Jim Hughes, an air quality specialist with the DEQ.
And just like the game “Rescue Boat”, there are no winners in the oil trading business, only survivors!