RIN Job!

*EPA PROPOSES 2014 RENEWABLE FUEL QUOTA BELOW LEGISLATIVE TARGET

*EPA PROPOSES RANGE OF 15 BLN TO 15.52 BLN FOR RENEWABLE FUELS

*EPA PROPOSAL SAID TO CALL FOR RANGE BELOW 2007 TARGETS

Looks like it we’re getting the EPA version of Universal Healthcare.  Hit the brakes and put ‘er in reverse.  This should play out bullish as we’re backing out RINs.

Bored?  Happy reading: http://www.epa.gov/otaq/fuels/renewablefuels/documents/420f13048.pdf

***UPDATE***

This may bode bearish for gasoline in the near term as most are thinking that this is going to reduce the costs of RINs to gasoline.  We take out that premium and life is good once again.  We are still bullish gasoline though as the bottom of the cycle is getting set here.  In a reversal of demand destruction when prices are too high, we’re seeing demand construction with gas prices so low.

This is a great time for lower gasoline prices as we’ll see more holiday travel and more shoppers driving to stores.  We would also think that consumers are going to use the fuel savings to inject more money into the shopping season.

Bull in a China shop

There’s been a laundry list of “new reforms” from China this morning.  Things like loosening policy on only having one child and to encourage foreign investment into the country.  We think that the bottom line on all of these things is that they are looking to increase growth and with that oil demand.

It didn’t take much longer for this official statement:

CHINA CENBANK CHIEF ZHOU SAYS TO PULL OUT ALL STOPS ON FINANCIAL REFORMS
CHINA CENBANK CHIEF ZHOU SAYS REFORMS TO HELP SUSTAIN HEALTHY ECONOMIC GROWTH

Our opinion is that this will give a boost to Brent crude in anticipation of stronger demand.  WTI is going to follow, but we’re still targeting -$20.

Refinery Issues (CVR)

More than likely a better story for the reason that RB and the RB cracks has decided to lead the complex into orbit these past few days…

Thanks to Bloomberg for breaking this story first!

CVR Wynnewood Reported Malfunction at Crude Unit Nov. 12

Dan Murtaugh

Nov. 14 (Bloomberg) — Refinery in Oklahoma reported emissions from fluid catalytic cracker stack because crude unit malfunction caused process upset, according to filing with state regulators.

* Co. reported excess emissions for several hours, state

filing says

* Refinery capacity 70,000 b/d

Boom!

We’re following a story about an oil/gas/pipeline/rig/fire/explosion.  This is in Milford Texas and is just south of Dallas.  For the most part, the market is hell bent on moving a lot farther and faster than any of this news, but we thought it’s worth stating the facts here.

If it is only Nat Gas, there’s not a lot this is going to do to affect oil.  The area is far away from any refinery operations so we don’t think this is going to affect any production or interrupt any power to these refineries.

You can see the pics here: http://www.theepochtimes.com/n3/359965-milford-texas-ellis-county-pipeline-explosion-fire-seen-for-miles/

We’ll keep you updated on this, but for now it looks like “Algos Gone Wild”

Fill Me Up Buttercup

TransCanada is launching a binding season for nominations on the new Keystone XL Pipeline from Cushing to Port Arthur TX.

Take a breath, it is going to take a moment to figure out what that means to the teeming millions.  For those ready to figure this out on their own, here’s the link: http://www.marketwatch.com/story/transcanada-launches-binding-open-season-for-cushing-marketlink-to-gulf-coast-2013-11-13-81733146?reflink=MW_news_stmp

Now for the rest of us fast talkers and slow thinkers, here’s the deal.  TransCanada is busy taking nominations for crude oil that will be put on the Cushing to Port Arthur line that opens in December/January.  That line will be sending up to 800K b/d of crude from Big Bad Cushing to the biggest refinery hub in America.  This open season is more of an addition to the addition.  Seems that they have already apportioned a lot of crude along the line, but are now extending that line to other refineries/storage in the area.

What this means for the trading community is that once we start trading January WTI (CL), we’re going to have a good chance to push the front CL spread back to backwardation.  Hard to think about right now, but in a few weeks we should start to see decent draws on Cushing and once we hit 2014, it’s all good.  Cushing is on target to become a transportation hub more than a storage facility.

North Sea Blues

There’s talk of a decline in North Sea Brent production in December.  Sources are saying that we should see a drop of about 4%.  If one wants to speculate about the re-balancing of the Commodity Index funds (DJ-UBS: Brent +0.72%, WTI =0.72%), it may not that they think that Brent is going to be that much more in demand, but perhaps supply is going to be that much lower.

Good article here from Reuters and the futures of the North Sea:

http://uk.reuters.com/article/2013/11/11/uk-britain-northsea-review-idUKBRE9AA0HO20131111

Technical difficulties

Granted I have turned back to a bullish tone since Friday’s jobs report, but I was a little shocked to see my E-Quotes showing extraordinary volumes today. For instance, I have 260K contracts traded on my 60min bar chart.  Volumes in RB (40K) and HO (35K) are also way off the mark.  I’ve contacted the CME about the issue and it seems they’re not having such a good semi holiday this Veteran’s Day.

Official word from them is it’s affecting other contracts as well, but they’re working as quickly as possible to correct the issue.  In the meantime if I were trading anything that was volume related today on my screen, I’d be running out of money for commissions at a drastic rate.  We just want to say that if this is something that is affecting other CME customers, it’s quite possible we see a shut down of the system soon.

Umm…didn’t see that coming

During the Gvt shutdown, the BLS might have used some of China’s bean counters for this one:

Unemployment 7.3% (expct 7.4%)

Non Farm Payrolls +204K (expc +120K) Sept NFP revised to +163K vs. +148K.

I could go into more details here, but I’m still in shock.  Time to sharpen my Bull horns once again and get back to where I belong.  We see that oil is taking a hit on the number, but it’s going to be a battle now with traders trying to weigh the strength of the USD against the real increasing demand.  For all of my rhetoric and ranting about weak refinery production causing the spikes in demand, I guess I was wrong.  There’s real demand out there and at this pace, it’s sure to get better.

Make no mistake, QE tapering is on the agenda before Big Ben Bernanke leaves and that’s going to cause some spike in the USD, but we might break the correlation with oil falling on that premise.  We’ve been backing out enough oil imports to get this back on track into the end of the year.  I’m also giving a healthy reconsideration to the WTI/Brent spread now too.  While the EU is busy fighting deflation and looking at stimulus, the US is calling QE passe.

A Tale of Two Tapes

We’re not exactly sure how this morning is going to play out from the economic standpoint, but there’s a lot to think about.

We are shocked and surprised that the GDP numbers came in so high (2.8%).  That’s on the opposite end of the weaker than expected Jobless Claims (336K).  This doesn’t bode well for the Unemployment numbers tomorrow.  We think that oil is going to take a pass on the Rate, but if Non Farm Payrolls are <120K, oil demand and prices fall hard.

On the other side of the Pond, we had the ECB cut it’s refi rates to 0.25 and that only leaves room for QE (QEU?) from here on in if they are serious about fighting deflation.  We know they are struggling with unemployment there too, but it’s the way of the world right now; Jobless recovery.

TV Time Tuesday

I’m scheduled for CNBC Squawk Box at 7:30am EST on Tuesday, 11/5/2013.

I’ll say some things about oil and the economy.  I’ll try to say something interesting.  For sure though, I will be smiling.