Cold Weather Continues to Wreak Havoc On Energy Markets

On January 24, 2014 by TradingDesk

Cold weather across the US continues to wreak havoc on energy markets, as more refineries have experienced operational issues and demand has spiked for any fuel that is able to generate heat. States of emergency have been declared in many states as natural gas, propane and diesel shortages become widespread and trucks are having to travel beyond state lines to find new sources of supply. Yesterday’s DOE report demonstrated the regional nature of these disruptions as refinery runs in Padd 1 & 2 dropped sharply along with diesel stocks. The challenge over the next few weeks will be a more urgent version of the same theme that has dominated physical energy supplies in the US over the past 2 years: How do we get the ample supplies from the US Gulf Coast to the population centers on the East Coast.

While these weather-related issues are certainly extreme and causing much heartache at the moment, the price reaction so far suggests that the disruptions will not last much longer. ULSD Futures prove this point with February futures adding 1%, while contracts in April and beyond were all lower for the day. RBOB meanwhile is dropping again as the same factors that have caused a spike in diesel demand and causing gasoline demand to stay at multi-year lows.

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