Today could be triple witching day for the oil markets. We have a still shaken world financial community, the key release of Energy Information Administration data petroleum statistics at mid-morning, and the expiration of March futures contracts. If you have a weak heart or a shaky constitution, you might want to look away, or run away like Sir Robin.
Regardless of what happens in the huge global futures and spot markets, retail gasoline prices have plenty of upward momentum. Nationwide numbers will end February 2007 just shy of $2.39 gal. In fact, we just crossed the $100 bbl mark (there are 42 gallons in a barrel), although taxes account for about 45cts gal or nearly $19 bbl of that number.
Every television network led off its newscast last night with a story about the wild day on Wall Street. At the end of the day, the Dow Jones had shed 416 points or 3.29 percent and adjectives like “shaken”, “dumbfounded”, “rattled”, or even “battle-weary” were sprinkled through sound bites and reporter scripts.
“Big deal,” I thought to myself. The volatility we witnessed on Wall Street yesterday is a regular daily feature in the energy commodities sector. But I checked the 2007 numbers just to make sure that my intuition wasn’t leading me astray.
It was not. As of yesterday, there had been 38 formal trading sessions on the New York Mercantile Exchange for gasoline (RBOB) futures. In 30 of those 38 sessions, we have witnessed a variation of 4cts gal or more. There have been several sessions where gasoline prices have moved in excess of 7cts gal. Put another way, intraday swings of the Dow equivalent of 500 points or more are commonplace in the global gasoline market.
In fact, since January 18, the price of a single gasoline futures’ contract has escalated by 48cts gal, or 36 percent. That is the equivalent of a 4500 point move in the Dow.
Welcome to Hump Month
Long before we had classic comedy movies like White Chicks, Little Man, DC Cab, Stuck on You, and Booty Call, there were the Bob Hope and Bing Crosby road movies.
Inevitably, Bing’s character would convince Bob’s character to visit some exotic locale, where they would then be accosted by a mustachioed character played by Jerry Colonna, a comic genius. With eyes agape, Mr. Colonna would stare at Hope and Crosby and utter a quite elongated “Greeeeeeeetings . . . . my friends.”
For road movie fans, it was the signature moment. The adventure would soon begin.
Tomorrow represents the day most appropriate for that Jerry Colonna salutation in the oil markets. March is “hump month” - - it is the month this year that will see critical refineries return from maintenance, or be taken down for key work, and it is perhaps the month most likely to see refining “events” as units return from or go into needed pit stops.
It is also the month of the east of the Rockies “enema” where Winter gasoline must be flushed from the distribution system, and replaced on-the-fly with Spring/Summer blends. Together with April, it is the month that will most likely see the manifestation of “petronoia”, the term I coined, and that George Clooney stole for his movie Syriana.
Greetings.