CHAPTER 26
Energy Market Fundamentals
You must dig some more and focus on energy—one of the potentially most serious macrorisk land mines buried in the secular landscape of gold, precious metals, and all other investment asset classes. You must explore another whole world to understand the macromarket fundamentals that matter in the petro-patch. For your purposes, this chapter highlights a few key points.
First and foremost, the American Petroleum Institute (API) and U.S. Energy Information Administration (EIA) both publish a host of supply-and-demand statistics every week on Wednesday. I want to know everything about these two reports. Not only do I want to know the headline week-to-week change in overall supply of crude oil, heating oil, and gasoline, but I also want to know what is happening in distillates, reformulated gasoline, blending components, kerosene, propane, jet fuel (now ethanol, too), and refinery utilization rates.
Moreover, I want to know the breakdown in each product by “Pad,” or delivery point. Pad 1 is the East Coast and Pad 5 is the West Coast; Pad 2 represents the Midwest, and the NYMEX delivery point at Cushing, Oklahoma; Pad 3 is the U.S. Gulf port; and Pad 4 is the Rocky Mountain region.
Heating oil data for Pad 1 is most important. For gasoline, Pad 5 is consistently short supplied, particularly when it comes to reformulated gasoline (RFG), which is also a major factor for Pad 1 and the Northeast, acutely so during the peak summer driving season.
It ...

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