Monday August 6, 2018
Pipelines Show Promise
3.3 million barrels of oil per DAY are being produced in the Permian Basin. The good news is that this is making the USA independent of the volatile Middle East. Indeed the US is poised to over take Saudi as the largest oil producer. The bad news is that there are not adequate ways to get this oil to the refineries on the Gulf Coast.
Epic Midstream Holdings LP is building its first pipeline in the Permian Basin. It is considering raising its capacity from 440,00 barrels a day bpd to 675,000 bpd. The price producers actually receive in the Basin is some $12 (at least) lower than the posted prices near $70.
Corpus Christi has become the new boomtown port on the Gulf Coast. Epic Midstream, Plains All American Pipeline LP, and Phillips 66 with refiner Andeavor are adding some 1.8 mbpd of combined capacity next year.
After a drop in the FANG tech stocks, tech index XLK moved up 1.27% Thursday. Even the DJIA began to recover. The DJIA had a two hundred point rally from its low to high point intra-day.
Crude oil rallied 1.92% to close at $68.96. Technicians would call that an outside day with a lower low and higher high than the previous day.
Natural gas had a great day up 2.1% closing at $2.82, The chart of Chesapeake CHK looks a lot like the natural gas price chart thought CHK did not bounce today. I suspect we are about to see a rally in CHK.
Alerian MLP is an ETF of pipeline companies It rallied 4.79% today. My guess is that after a very disappointing two years, pipelines are back.
This column has warned of the unintended consequences of a trade war. Yes the Chinese Yuan is at a one year low. And Chinese stock markets are also falling. But then so are the fortunes of nail makers and kidney bean farmers here in the US. Owners of those businesses are warning they cannot last much longer, unable to sell given high retaliatory tariffs. And unable to sell kidney beans abroad, the bean farmers are not buying equipment from other manufacturers who are also experiencing higher steel costs. Hello unintended consequences.
Finally the Trump administration is doing a great job of rolling back Obama regulations creating new lows in unemployment. If only Trump would discuss that rather than Russia, Mueller, and Sessions.