Cooking With Natural Gas March 16 2023

The Energy Information Administration released their weekly report Thursday.

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The current storage is near the high end of 5 year average, for this time of year. That is a good thing, but we should soon enter into a storage growth period.

Of course, it varies by region...

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Mountain and Pacific regions are still down, and has been reflected by their prices over the past few weeks. The good news, is those prices are falling. 

The price at Sumas on the Canada-Washington border, the main pricing point in the Pacific Northwest, fell $3.74 from $7.16/MMBtu last Wednesday to $3.42/MMBtu yesterday. 

The price at Malin, Oregon, the northern delivery point into the PG&E service territory, fell $1.48 from $7.52/MMBtu last Wednesday to $6.04/MMBtu yesterday, leading to a $1.86/MMBtu decline in the price at the PG&E Citygate in Northern California from $8.80/MMBtu last Wednesday to $6.94/MMBtu yesterday. 

So the U.S. is starting to look good. HOWEVER, storage contains natural gas that was priced at much higher rates. While most futures are substantially down, that higher priced NatGas in storage will prop up energy prices to the consumer. They should trend downward from here. How long that takes... I don't know. 

The same situation is seen in UK and EU. However prices are still elevated and will likely remain elevated. There should be some easing to the consumer, but not sure that will happen this year. 

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An example might be the UK pricing. It will likely never return to February 2021 levels, unless Russian NatGas returns to the market. Not looking likely.

The UK had an outlook of £3,600~£5,500 late last summer and settled on a cap of £2,500. Current outlook is £1,700~£2,300. The cap remains in place, as the average price in storage... exceeds that cap.

That remains the situation in much of the EU. It will take a long while to recapture the excessive inventory costs of stored Natural Gas. 

In short, the outlook for EU and UK natural gas futures are in the current range. Same for the U.S. 

As for the U.S. consumer, it is not out of the realm of possibility, that lower natural gas prices will slowly trickle through the system and maybe return to levels of 2 years ago, by end of the year... hopefully.

The EU and UK will not see a return to levels of 2 years ago. Maybe a reduction of 10% sometime by end of the year. 

In any case, I have said my piece and will take a break from writing about natural gas... and partake of something, which will give me that other natural gas.

Gasoline consumption through last week ending, Mar-10-2023

Gasoline prices were (per AAA) were up 2¢ this week, to $3.466. A year ago, the price had ballooned to $4.316. 

The seasonal consumption is slipping a bit. (This is a four week moving average). It is -0.8% below one year ago levels. However, the national average pump price is -20.2% below same period.

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If you are really into this type of thing... the import/export surplus of gasoline since last March 1st 2022, stands at +95.9M barrels. This is a global market, so the global economy, as well as refinery output, is key to where pump prices will be.

Where will pump prices be next week? Something very serious is going on with crude, as prices have plummeted the past few days. With it, gasoline futures are in a bit of tailspin.

Last week, I forecast a 7¢ rise and got 2¢. That is a good thing. Currently the number are showing a dramatic fall of nearly -17¢. 

I wouldn't take that to the bank, although I am not sure what to take to a bank these days.

Crude Inventories Edge Up - Mar 15 2023

Today's EIA.gov report. 

Crude stocks up again, +1.5M barrels, from last week; Distillates slid -2.5M Barrels; and Gasoline slid -2.0M barrels. 

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WTI has fallen to $68.39, compared to $75.60, one week ago, and $92.83 a year ago. 

Refinery output edged up on a weekly basis, but still slightly below one year ago levels. 

For anyone interested, the U.S. has exported 528.7M barrels of crude and petroleum products, more than imported, since March 1, 2022. 24.8M barrels this past week.

Overall, crude stocks remain quite healthy, compared to this time last year, with days supply at 31.8, compared to last year's 27 days.

The SPR remains steady for the past 8 weeks at 371.579M barrels.

The February Advance Retail Sales Report

ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES, February 2023 

Advance estimates of U.S. retail and food services sales for February 2023, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $697.9 billion, down 0.4 percent (±0.5 percent)* from the previous month, but up 5.4 percent (±0.7 percent) above February 2022. Total sales for the December 2022 through February 2023 period were up 6.4 percent (±0.4 percent) from the same period a year ago. The December 2022 to January 2023 percent change was revised from up 3.0 percent (±0.5 percent) to up 3.2 percent (±0.3 percent).

Retail trade sales were down 0.1 percent (±0.5 percent)* from January 2023, but up 4.0 percent (±0.7 percent) above last year. Food services and drinking places were up 15.3 percent (±2.6 percent) from February 2022, while general merchandise stores were up 10.5 percent (±0.2 percent) from last year.

The data is not inflation adjusted. The data in this graph is...

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Plain and simple... the quantity goods being bought, remained rather flat for several month. Inflation has made for the increases in cost.

but up 5.4 percent (±0.7 percent) above February 2022.

Again, that is before inflation is taken in consideration. The CPI-U, was 6.0%. 

For the month to month, with inflation adjustments...

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It hasn't fallen off a cliff, but it hasn't really grown. The growth is mostly due to inflation. 

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Adjusting for inflation, the above chart lists the only groupings that did not slip last month.

Not sure what to make of the data, to calculate going forward. Will find out next month!!

The BLS has released the February Producer Price Index Report. (historical releases)

The BLS has released the February Producer Price Index Report. (historical releases)

The Producer Price Index for Final Demand decreased 0.1 percent in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.3 percent in January and declined 0.2 percent in December 2022. (See table A.) On an unadjusted basis, the final demand index rose 4.6 percent for the 12 months ended in February.

In February, the decline in the final demand index was led by prices for final demand goods, which fell 0.2 percent. The index for final demand services edged down 0.1 percent.

The index for final demand less foods, energy, and trade services increased 0.2 percent in February after rising 0.5 percent in January. For the 12 months ended in February, prices for final demand less foods, energy, and trade services advanced 4.4 percent.

Final demand goods: The index for final demand goods fell 0.2 percent in February following a 1.2-percent advance in January. A 2.2-percent decline in prices for final demand foods was a major factor in the February decrease. The index for final demand energy moved down 0.2 percent. In contrast, prices for final demand goods less foods and energy rose 0.3 percent.

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Okay, so let me blow my horn a bit, with last month's prediction...

Next month is likely to surprise to the low side, possibly even a monthly negative, with annual at the +4.4% range.

Okay, got that out of the way. All in all a good report, with many areas of hope. Now on to the "Nonfood materials less energy." Which, I guess, is similar to core... being without food and energy. That popped +1.2% for the month, following January's +1.6%. I get this feeling it will be near +1.8%, when March's numbers come out. 

Still, I would anticipate March to be year over year of +3.0%, and month to month being flat. 

 

Real Earnings report, March Reports 2023

The BLS has released the latest Real Earnings Report.

Real average hourly earnings for all employees decreased 0.1 percent from January to February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from an increase of 0.2 percent in average hourly earnings combined with an increase of 0.4 percent in the Consumer Price Index for All Urban Consumers (CPI-U).

Real average weekly earnings decreased 0.4 percent over the month due to the change in real average hourly earnings combined with a 0.3-percent decrease in the average workweek.  

Real average hourly earnings decreased 1.3 percent, seasonally adjusted, from February 2022 to February 2023. The change in real average hourly earnings combined with a decrease of 0.6 percent in the average workweek resulted in a 1.9-percent decrease in real average weekly earnings over this period.

As always, I compare to February, 2020... or just prior to that "thing." As a reminder, the lower end of the wage scale got sent home and/or had jobs that were not of the work from home variety. Thus, a massive jump at the beginning of the "thing", which tapered earnings downward as the lower income groups re-entered the workforce, or as it became clear they were also essential.

The following chart indicates, down -5¢, and down from last month.

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The following chart (weekly) indicates -46¢ and down two straight months.

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The following chart, indicates +11¢, hourly and up from last month, but below 2 months ago.

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The following chart, indicates a weekly gain of +$5.54, but down from last month.

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In summation, the report again, indicates earnings are treading water. 

CPI DATA results, March Reports 2023

The BLS report was released this morning and it was a shade above consensus estimates. (historical releases)

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in February on a seasonally adjusted basis, after increasing 0.5 percent in January, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 6.0 percent before seasonal adjustment.

The index for shelter was the largest contributor to the monthly all items increase, accounting for over 70 percent of the increase, with the indexes for food, recreation, and household furnishings and operations also contributing. The food index increased 0.4 percent over the month with the food at home index rising 0.3 percent. The energy index decreased 0.6 percent over the month as the natural gas and fuel oil indexes both declined.

The index for all items less food and energy rose 0.5 percent in February, after rising 0.4 percent in January. Categories which increased in February include shelter, recreation, household furnishings and operations, and airline fares. The index for used cars and trucks and the index for medical care were among those that decreased over the month.

The all items index increased 6.0 percent for the 12 months ending February; this was the smallest 12-month increase since the period ending September 2021. The all items less food and energy index rose 5.5 percent over the last 12 months, its smallest 12-month increase since December 2021. The energy index increased 5.2 percent for the 12 months ending February, and the food index increased 9.5 percent over the last year. 

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That's all from the BLS. Now on to my inflation stats. Which receded annually to 5.0% and 0.2% month to month.

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I would hope for a repeat during March, but with nearly half the month already gone... it is looking a bit iffy. 

Overall, the inflation outlook is improving, but still some pinkish areas overall. The PPI report tomorrow might provide a better outlook.

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Most everything I have read, indicates the CPI report was "close" to expectations. The upside surprise was the Core figures, which were tad above expectations. 

Which brings me to the March expectations. Everything I am reading indicates next month's release will have a much lower rate of inflation, as in 5.2% range. However, core is expected in the range of 5.7%, or to increase. Also on the month to month.

For that to happen the non core part - food and energy,  would have to drop fairly sharply. Not really seeing it at this point.