The Energy Report...WAR & PEACE

LOS ANGELES (Sept 15)  Global petroleum markets continue to price in the odds of war and peace, tough negotiations between Secretary State John Kerry and Russian Foreign Minister Sergei Lavrov continue in Geneva as they seek a way to avoid war and to eliminate Syria of those nasty chemical weapons. You know those chemical weapons that they denied they had. (Oh, yeah, those chemical weapons)  So today we are in the twilight zone between war and peace and the petroleum markets will move on the perception of success or failure of the Geneva talks.

In fact they already are. Whether it is the volumes in the March 90 oil puts or the October and November 120 calls, traders are preparing for the best and the worst. Looking at the puts they are buying further out in the curve suggested that if war is avoided or not there will be more downside than upside regardless.

Yet we know that that is not risk to supply. In a wild headline driven session Brent crude soared as reports of Syrian rockets going into the Golan Heights caused a panic. When it was reported that it was just a mistake (I hate when that happens) we saw some relief. Yet we saw another spike when Libya declared a force majeure on oil supply as dock worker strikes continue to impact production.  That helped support US products as the US is being viewed as the stop gap for the global product market. RBOB also popped on problems with the BP Whiting Refinery, which is a very important cog in the US refining wheel. Since upgrades were made at the plant it has had a major impact on Crude Supply in Cushing Oklahoma and in turn the price of WTI crude. The Markets are in significant ranges and trade levels can give you areas where we should see the buying and selling.

Nat Gas number hit right on the head with a 65 bcf injection. The market increased on the number and now we look at the Gulf. Lots of storms but so far little risk to supply! Of course will the trade feel comfortable being short over the weekend with a weather map that looks like someone spilled coffee on it? I think not.

(Source:  Phil Flynn)