The staff of FUELSNews presents FUELSNews 360° Q4 2017
Quarterly Report: Market News & Information.
FUELSNews 360°, published four times a year by Mansfield Energy, analyzes and summarizes the prior quarter’s activity in the oil, natural gas, renewables and refined products industries. The purpose of this report is to provide our customers industry market data and trends both domestically and globally and deliver some insight into upcoming challenges facing the energy supply chain.
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Check out this excerpt from the Executive Summary:
The final quarter of 2017 ended with a roar of enthusiasm. Markets are broadly headed towards supply/demand balance in 2018, and
inventories are returning to historical levels. Lower inventories and lack of replacement supplies have contributed to less slack in the
supply chain, increasing volatility in future price outlooks. Overall, WTI crude rose a full $10 throughout the quarter, beginning near
$50/bbl and ending slightly above $60/bbl.
The end of 2017 ushered in rising geopolitical and production uncertainty. Iraq, Iran, Saudi Arabia and Libya all struggled with
instability, pulling prices higher throughout the quarter. Headlines of coming conflicts came and went with no realized impact, yet markets
are still priced in higher risk of outages. In recent years, prices have not reacted strongly to supply risks because inventories were so high.
Suppliers no longer have the luxury of high inventories to meet demand during outages, leading to higher prices.
Against a backdrop of geopolitical risk, other fuel infrastructure disruptions affected fuel prices. In the U.S., leaks on the Keystone
Pipeline caused a shutdown, propping up U.S. WTI crude prices. In Europe, the Forties Pipelines was taken offline for repair, pushing
international Brent crude prices higher.
Continued OPEC restraint remains a major contributor to rising prices. OPEC’s compliance with their production deal exceeded
100% at times, keeping supplies off the market. In November, the group signed a deal to extend cuts into 2018, which was not a
surprise to the market but has helped keep prices trending higher.
While supplies have been tightening, global oil demand is on the rise. The global economy is firing on all cylinders, with all major
economies growing in unison. With U.S. unemployment at the lowest level in decades and global growth set to reach 3.9% in 2018,
global oil demand could surpass 100 million barrels per day.
Together, the mass of bullish headlines, related to both supply and demand, sent prices catapulting above $60/bbl by year-end,
breaking through the previous $54 ceiling on prices.
Rising crude prices were outpaced by NYMEX diesel prices, which soared throughout the quarter in response to strong agricultural
demand and cold temperatures. Where prices had previously capped out around $1.75, Q4 saw diesel prices surpass $2/gal.
Hurricane Harvey was also a major contributor – refining outages during Harvey caused suppliers to deplete existing diesel stocks,
leading to seasonally low inventory levels in Q4.
Regionally, consumers in the Midwest suffered normal seasonal price increases resulting from strong agricultural demand
combined with the timing of refinery maintenance season. The combination of high demand and low supply caused local prices
to rise more than fifteen cents above the NYMEX. Because the Midwest has become an important refining hub in the U.S., the
impacts of reduced supply were felt in the East Coast and Gulf area as well. Without large Chicago fuel shipments flowing to the
Northeast, the region had to rely on European supply and Gulf Coast production.
This quarter, Tom Krizmanich finishes his three-part series on natural gas procurement, sharing how fuel purchasers and
natural gas purchasers can learn from each other to promote savings and streamline their supply chain. Make sure to check out
his article on page 40.
We hope you enjoy this quarter’s issue of FUELSNews 360°. If you have any questions, or would like to request additional copies, email
us at email@example.com.