Sorry Irene, but you’re no Katrina...
Not to marginalize the loss of life and property in the wake of Hurricane Irene, but, based as a function of media hype, this weekend’s storm along the eastern seaboard was a dud.
This is not to imply that it was not wise to err on the side of caution from a public safety point of view. It is meant to say that as far as having any kind of lasting impact on oil deliveries, Irene will pale in comparison to 2005’s Katrina.
A portion of the epicenter of the downstream market in the East (Philadelphia and New York Harbor) was shut in over the weekend, but by all accounts we are not looking at any prolonged disruption to output.
In today’s issue of The Schork Report we have illustrated the disposition of gasoline and distillate supplies in the East (PADD 1). Just by applying the eyeball test it can be easily discerned that supplies were in the best possible position to withstand a disruption to the supply chain.
To this effect, Nymex product prices ran up towards the end of last week on concerns related to the market’s ability to withstand Irene.
That is to say, the strength in the differential between Nymex WTI and the product contracts was the quintessential case of “buying the rumor…”.
Now that the rumor’s bark has proven to be worse than its bite, analysts at The Schork Report are advising clients that we think the odds are short for fact selling in the crack spreads.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.