The latest forecast is calling for some extreme cold in the 6-10 day outlook. This is the forecast the gas bulls have been waiting for.
As we noted last Monday, it had appeared that the crude oil bears in New York finally stamped their imprimatur on this market… sort of.
Be that as it may, we still questioned the bear’s staying power. To wit, on Friday, November 13th, the January WTI contract opened that day’s session at 77.47 and finished at 77.03. However, as we kicked off last week, the contract surged back towards 81.00. The market did collapse to end the week, oddly enough, finishing last Friday, November 20th, exactly where it opened on Friday the 13th, 77.47... spooky.
Here at The Schork Reportwe are still bearish, but we concede the bears will now have to fight through a thick band of technical and quantitative support just to get to the $70 critical point of reference.
It’s not mission impossible for the bears, especially if Bernanke comes out again to jawbone the dollar, but we remain skeptical. After all, the strength in crude oil is nonsensical, but as we all know, crude oil can remain nonsensical longer than the bears can remain solvent.
Case in point… Valero’s announcement on Friday to permanently close its Delaware City refinery and layoff 550 employees. This happy news comes about a month after Sunoco announced it was shuttering (indefinitely) its Eagle Point facility and laying off 400 employees. That is nearly 1,000 employees being laid off in an industry, that just a year and half ago was being lampooned by know-nothing presidential wannabes for “obscene” profits of 10 cents on the dollar.
The actions being taken by Valero, Sunoco et al are in response to the soaring cost for crude oil and the inability to pass along this inflated cost onto consumers.
Regardless, this is not preventing high-handed Wall Street touts from extolling the canard of owning crude oil as an inflation hedge.
Therefore, refiners now must go to the mountain. By taking these draconian steps, refiners are raising the white flag on any sort of correction in crude oil prices. Demand for refined products is poor. Thus, their only other option is to slash enough supply of refined product from the market in the first quarter to shift the curve to the left.
Of course, when gasoline at the pump is well above $3 in the second quarter next year, we can expect the industry to be harangued, mercilessly, by a chorus of the usual suspects in Washington, most of whom, who have never had to make a payroll, for putting shareholder interests ahead of the American public. Therefore, you heard it from The Schork Reportfirst, you will see a move this spring by the radical left in Congress to nationalize the industry… for the common good of course.
Stephen Schork is the Editor of, and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.