Markets Jump on Weather, Geopolitics

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--After something of a market lull, weather events in North America and a ramp-up of geopolitical tensions in Eastern Europe caused a substantial spike in commodity prices on Thursday.

Parts of the Pacific Northwest are under storm advisories or warnings as a so-called atmospheric river descends on the region. Higher elevations in the Rocky Mountains are already seeing snow, while parts of California could see as much as 12 inches of rain.

"The atmospheric river is expected to peak in intensity today, but with moderate bouts of rain lingering through much of Friday and snow levels finally lowering somewhat on Saturday," the National Weather Service said on Thursday.

It had been something of a mild season up until this week, with above-normal temperatures lingering through early November. Outside of the Pacific Northwest, parts of Oklahoma were under a freeze warning, while snow and cold temperatures descended on the Great Lakes states.

The onset of colder weather triggered a significant spike in natural gas prices, which had been suppressed to the point that energy companies were holding back due in part to weaker demand. In early trading Thursday, Henry Hub, the U.S. benchmark for the price of natural gas, was up more than 6% to trade around $3.40 per million British thermal units (MMBtu).

Henry Hub started November closer to $2.67/MMBtu. The jump in price was supported by issues with maintenance at Corpus Christi Pipeline's Sinton Compressor Station in Texas. The four-day maintenance period ended Thursday, though capacity was curtailed by 0.4 billion cubic feet per day (Bcf/d).

Elsewhere, the energy arm of Industrial Info finds supply-side factors may be impacted by a surge in exports of liquefied natural gas (LNG), which are approaching record levels. The Energy Department, however, stated that most supplies for heating fuels are ample for a winter season that runs through March.

Crude oil prices too were on the rise amid an escalation in geopolitical tensions. On Thursday, Ukraine claimed that an intercontinental ballistic missile (ICBM) struck the city of Dnipro from Russia. While the ICBM was not armed with a nuclear warhead, it marks a major escalation in the conflict that follows Ukraine's use of U.S.-supplied long-range missiles on Russian targets.

Brent crude oil, the global benchmark for the price of oil, was up 2% in early Thursday trading to move in the low $74-per-barrel range. The bull rush was supported in part by economic signals Wednesday from the Energy Information Administration (EIA), the statistical arm of the Energy Department.

The EIA reported that U.S. crude oil inventories were about 4% lower than the five-year average for this time of year. The volume of refined petroleum products moving through the U.S. market during the seven-day period ending November 15, a proxy for demand, was up 1.2% from the same period last year.

Prices and weather patterns could influence travel in the United States ahead of the long Thanksgiving holiday. Travel club AAA is expecting record-setting travel this year, though it said that it expected most holiday-goers are headed to warmer climates.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).