MARKET ANALYSIS
AS PREPARED BY COMMISSION STAFF
July 12, 2013

 

The following analysis has been used by the Commission as part of its price adjustment methodology and is provided here to assist the public in understanding some of the background factors influencing current market prices.

 

Crude Track:
  Recent WTI Crude (US$/bbl)
 

Jun 28

$ 96.56
 

Jul 1

$ 97.99
 

Jul 2

$ 99.60
 

Jul 3

$101.24
 

Jul 5

$103.22
 

Jul 8

$103.14
 

Jul 9

$103.53
 

Jul 10

$106.52
 

Jul 11

$104.91
 Average Brent Crude for July: $106.50.
 
  Average Average Average
  2013 2012 2011
January  $ 94.70  $100.51  $89.44
February  $ 95.50  $102.26  $88.83
March  $ 92.73  $106.36  $102.74
April  $ 89.59  $103.18  $109.67
May  $ 94.93  $ 95.47  $101.29
June  $ 95.76  $ 82.28  $96.40
July  $102.52  $ 87.93  $97.43
August    $ 94.05  $86.23
September    $ 94.74  $86.13
October    $ 89.72 $86.10
November    $ 85.87 $96.86
December    $ 88.06 $98.51
         
  US $
Per Barrel		 CDN  Cents
Per Litre		 CDN Cents
Per Litre		 CDN Cents
Per Litre
  CRUDE RUL F/O DIESEL
Jul 10/13 $106.52 129.2 99.8 137.1
Jul 10/12 $ 83.91 113.2 93.0 116.0
YOY Diff. +22.6 +16.0 +6.8 +21.1
% Change +26.9% +14.1% 7.3% +18.2%

Commentary:

Wholesale crude prices have escalated by 9% since July 1 and primarily driven there by increased Middle East tension, improved US economic activity and a notable increase in demand in the US for gasoline.  DOE reports this past week indicated a dramatic decrease in US crude and gasoline inventory levels together with a 2.5% increase in gasoline consumption. 

A corresponding increase in refined product wholesale pricing has also been noted as inventory draws, increased demand and higher input costs have impacted the retail market.

An additional interesting observation has been the evaporation of the longstanding price premium of Brent vs WTI crude pricing.  In February the price differential was in excess of $20/bbl whereas currently the price spread is down to less than $2.00/bbl.  The explanation appears, as is often the case, to be related to a number of issues.  Firstly, the historical glut in crude holdings at Cushing, Oklahoma is now being dramatically reduced as a result of the relatively recent reversal of the Seaway pipeline and the significant increase in rail shipment of crude now recorded as upwards to one million barrels per day.  This improvement in transportation ability has served to reduce Cushing inventories which previously had been discounted due to their essentially landlocked status.  At the same time, Brent pricing has been influenced by increased supply with the return of Libyan and northern IRAQ supply fields.  The continued growth of US domestically produced crude from places such as North Dakota's Bakken Shale and Texas' Eagle Ford fields should continue to put downward pressure on Brent pricing as the reliance on foreign crude imports is reduced.

Going forward, the previously noted significant reduction in crude stocks should soon translate into increased finished product stocks which hopefully will serve as a moderating influence on refined product wholesale and retail pricing.

Economic Data:


Platts Inventory Update:

The US Energy Department ("DOE") weekly petroleum inventory assessment, issued July 10, 2013, reported a decrease in US crude stocks of 9.87 million barrels. A combination of a decline in imports from countries such as Canada, Angola, Venezuela and Nigeria and increased refinery operating capacity utilization, especially on the Gulf Coast, contributed to the crude oil decline.
 
 US gasoline inventories decreased by 2.63 million barrels over the previous reporting period despite increased refinery utilization. Implied gasoline demand increased in this reporting period to the highest level in nearly a year.
 
 US distillate inventories increased by 3.04 million barrels with production increases in US Gulf and Midwest reporting regions. US Atlantic Coast distillate inventories are still 20% below the previous five year average.
 
 Refinery utilization decreased slightly to 92.4% of production capacity.

DOE Report:

 

 

 

Weekly
(bbl)

Year over Year
% Change
 

Crude

 -9,870,000 -1.1%
 

Gasoline

 -2,630,000 +6.4%
 

Distillates

 +3,004,000 +2.4%
Source: DOE July 10, 2013

 

Note:

Legend:
DOE Department of Energy
RUL Regular Unleaded Gasoline
F/O Furnace Oil
WTI West Texas Intermediate