Posted on 09/14/2008 11:33:18 AM PDT by kellynla
NEW YORK (CNNMoney.com) -- Oil prices fell below $99 a barrel on Sunday in a special early-start session as traders bet that Hurricane Ike did not cause significant damage to refineries.
"The market is expressing some relief," said Andrew Lebow, a broker at MF Global in New York. "We were worried on Friday that the storm surge would flood the refineries, but right now it looks like that was not the case."
"The storm surge was not 20 feet, it was more like 12 or 13 feet," said Lebow. While preliminary reports showed that damage was not as bad as originally feared, the market was still waiting for more information from the region, he added.
Another analyst agreed that the full picture isn't complete. But with refineries out of power, demand for crude will be weaker.
Ike "has hurt the demand side for crude more than the supply side," said Phil Flynn, senior market analyst at Alaron Trading.
Oil was trading down $2.17 to $99.01 after trading as low as $98.55 a barrel in electronic trading, which normally starts at 6 p.m. ET. On Friday, oil settled at $101.18 a barrel on the New York Mercantile Exchange.
Prices have fallen nearly $50 off the record high price of $147.27 a barrel, set July 11. As the U.S. and global economies have slowed, demand for energy has fallen off.
Damage to refineries: Ike has weakened to a tropical depression, according to the National Hurricane Center, and was blowing over northern Arkansas Sunday morning.
Refineries are particularly vulnerable to flooding. After Hurricane Katrina, refineries were shut down for between 6 to 9 months due to flooding. Refineries process crude oil into usable products, like gasoline and home heating oil.
(Excerpt) Read more at money.cnn.com ...
Burn baby, burn!
So why the heck is my gas $4.75 per gallon????!!!!
You may be getting gouged. Or there is the other half of the process — production.
Wonder how much gas/diesel will increase due to Ike.
Gas is a refined petrolium product and since our refineries have been shut down a few times it leads to short supply. And, if stations are being told that they won’t see any for a bit then they are going to charge more.
The flip side is another month of higher gas prices is going to keep driving limited and reduce demand for gas and oil even more. I project $2.50 a gallon gas (87 grade) by year end.
Other factors are refining capacity, taxes, and local supply and demand issues.
How long before we start hearing what refineries damages actually are?
Also, you apparently don't quite understand (no insult implied or intended) that traders ALWAYS trade in anticipation of the worst possible outcome. In this case, that would have been major structural damage at X number of refineries. This did not occur. Therefore, the price of refined product is falling out of bed as traders abandon their positions.
RBOB, basis New York Harbor, is down 13 cents just now, and #2 oil (aka heating oil) is down 9 cents and change. This is **well** more than crude price has fallen today, just about $2.00/bbl.
In short, prices are doing exactly what they normally do after a hurricane hits the Texas coast.
They just don't do it all instantaneously.
Your gas is still expensive because of supply and demand in the completely free oil marked where oil controls 90 plus percent of the transportation fuel market and you are forced to buy it to get to work so you pretty much have to pay any price for it. But it’s not a monopoly and it’s a completely free market! Except that it’s legislated to the gills and manipulated up to the eyeballs, but completely free!
Semi-educated guess? Damage will turn out to be WAY less than anticipated on Thursday. Less flooding than anticipated, and not as serious (i.e. deep) as it easily might have been. Perhaps 1/3 of Texas gulf refining down for a week-10 days, another 20-25% for 3-4-5 weeks, 6-8 weeks at the outside (this, the outlier stuff, is the type of thing we won't learn about until late Monday, probably). Net-net, we dodged a large bullet.
FReegards!
The numbers are a little deceiving ... with that much refinery capacity offline, there will be a temporary glut of crude while at the same time a temporary shortage of refined product, namely gasoline. Expect to see crude prices go a little lower while there is a good chance of gasoline shortages.
Bush legacy...crude fell $8.00 during his “drill baby drill” speech in June and has kept falling ever since. Oil is down because America has found the will to drill.
;^)
Yah. You **definitely** want to be short the ‘gas crack’ spread, probably for November, for a few days or so. The mkt players bid it up obscenely last week while waiting on Ike.
.....So why the heck is my gas $4.75 per gallon......
Because you don’t live here where it has stabilized at $4.09
“Because they didn’t turn the pipelines back on until yesterday”
Where did you get this info? Everything I can find says that the pipeline is still down.
“Colonial Pipeline, which ships fuel from the Gulf Coast to the East Coast, said its Houston operations were down and that pipelines carrying natural gas and heating oil were closed.”
http://www.redorbit.com/news/business/1554618/refiners_assess_ike_storm_damage/
My understanding of the situation is that the pipelines will not be operational until the refineries are back up and running. Given the fact that electricity has not been restored to Houston (and that may take some time, given that I’ve read that 95 transmission lines have been disabled), my opinion is we’ll be very lucky to see the pipeline up and running on Friday.
One doesn't just throw a switch and start moving product again; it doesn't work that way.
You turn pipelines (compressors, actually, plus auxiliary devices) on in phases. You turn compressors on well before starting to pump, because you want to see if there is any incidental damage to the equipment (you'd much rather have something blow when the pipe is empty rather than when it's full of product, trust me on this).
You also want power to the pipe to inspect it, to see if any and how much moisture or actual quantities of water got into it. This doesn't happen often...just often enough to cause problems. Don't want a load of contaminated fuel, now do we?
So, NO -- the pipes aren't carrying product yet (that would be a new world record!), but, yes, they're 'on' in the key sense that power has already been (and, in the remaining cases, is being) restored to them.
Fair enough?
So why is gas $0.20 more a gallon today than it was on Friday when I filled up?
Also, see post 11. Your timeframe and mine are pretty close. Getting uniform electric power back up is clearly the first thing to do, but remember, most (maybe all by now, haven’t looked in a few years) pipes have their own generating equipment, either attached or switchable.
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