Q4 Kicks Off With Modest Gains

The 4th quarter is kicking off with modest gains for energy prices, after they ended the third quarter with heavy losses – despite the attacks in Saudi Arabia that took more than 5% of the world’s oil production capacity offline. The early bounce this morning may have more to do with technical factors (buyers stepping into an oversold market, or funds reallocating capital to start a new quarter) than it does fundamental, as the Saudis are claiming their output is now fully restored.

When will the bubble burst on West Coast gasoline prices? Monday saw another casual 15 cent price increase for CARBOB prices that are currently trading about $1.30/gallon above NYMEX futures, and $1.20 above the next most expensive market east of the Rockies. The price spike is bad news for drivers in the area that are now dealing with prices above $4/gallon, but may open up a window for retailers once the inevitable price collapse takes place.

Ethanol prices have continued their rally, surging more than 25 cents in the past week, with the latest move higher coming on the heels of a bullish USDA crop report. Ethanol RINs have not fared nearly as well, pulling back sharply in the past week as it becomes clear the latest rumors about changes to the RFS do not appear to be coming to fruition with little things like impeachment taking center stage in congress.

Want another reason why oil prices are no higher now than they were before the attacks in Saudi Arabia? The EIA published a note this morning highlighting production in non-OPEC nations, that are seeing historically low outages.

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