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Market Talk - 2024 march

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Market TalkThursday, Mar 28 2024

Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Market TalkWednesday, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

Click here to download a PDF of today's TACenergy Market Talk.

Market TalkTuesday, Mar 26 2024

Refined Products Seeing Small Losses Of Around A Penny While Crude Oil Contracts Hover Just Above Break Even

Energy futures are taking a breather to start Tuesday’s trading, with refined products seeing small losses of around a penny while crude oil contracts hover just above break even.

No new news on either the Red Sea shipping or Russian Refining attacks this morning, so Cocoa prices seem to be taking over the commodity headlines while energy markets wait on their next big move.

RBOB gasoline futures set a new 6-month high Monday at $2.7711, which leaves the door open on the weekly charts for the spring rally to continue. A run at the $3 mark is certainly possible in the next few weeks before the typical seasonal price peak is set just before the start of driving season.

A container ship lost power and crashed into the Francis Scott Key bridge in Baltimore this morning, causing a devastating collapse. While cargo shipping into the area will no doubt be impacted by this event, fuel supplies are unlikely to see any notable change since the 9 fuel terminals in Baltimore are primarily supplied by Colonial pipeline. Barges from Philadelphia refineries do supplement Baltimore supplies at times, and those vessel flows will be impacted at least until rescue operations are completed and the bridge sections removed from the waterway. That said, since shipping up from the Gulf Coast via Colonial is generally cheaper than shipping an NY Harbor-priced barrel south, the amount of supply disrupted by this event will be minimal.

While we’re still waiting on the official forecasts for the Atlantic Hurricane season, early reports continue to suggest that we could be in for a very busy year due to warm water temperatures and a forming La Nina pattern.

Dallas meanwhile is preparing for a different sort of disruption, with city officials encouraging companies to let employees work from home during the solar eclipse on April 8th as metroplex traffic is expected to surge. While some isolated fuel outages are certainly possible if people start panic buying gasoline they don’t need, there’s no reason to expect any widespread impact from the demand spike.

Today’s interesting read: Why AI requires a staggering amount of electricity and may create supply competition for EVs that will end up benefitting fossil fuels.

Click here to download a PDF of today's TACenergy Market Talk.

Market TalkMonday, Mar 25 2024

Money Managers Were Piling Into Crude Oil Contracts As They Rallied To A 5-Month High Last Tuesday

It’s a mixed start to the week for energy markets with ULSD trying to rally, up 2 cents in the early going, while crude oil prices cling to small gains, and gasoline prices show small losses in the early going.

Ukraine shrugged off the reported requests from US officials to stop blowing up Russian refineries, with at least 2 more plants targeted over the weekend, one of which was forced to shut down a crude unit as a result. Estimates vary, but the production taken offline by the refinery attacks so far in March is somewhere in the range of 400,000 to 700,000 barrels/day, which has pushed total output in the country to the lowest in a year. Perhaps most notable about the weekend attacks is that the refineries were more than 500 miles from Ukraine, which highlights the expanding capabilities of Ukraine’s drones.

As expected, Money managers were piling into crude oil contracts as they rallied to a 5-month high last Tuesday. The large speculative category of trader added more than 100,000 contracts worth of net length in WTI and Brent, most of which was new long positions. The net length in Brent is now at the highest level we’ve seen in a year but remains well below the historical levels which suggests the funds have plenty of more money to bet if they choose to do so.

The big funds were also piling into Gasoil (Europe’s version of ULSD) contracts last week, with a net increase of nearly 25,000 contracts, split fairly evenly between new longs and short covering. RBOB contracts also saw a healthy increase in length, although more than 5,000 new short positions were also added with some funds apparently betting that the 6-month highs reached last week will mark the peak of the spring rally. ULSD remains the least favored of all the petroleum contracts, with minimal change last week despite the big move in Gasoil.

Baker Hughes reported a decline of 1 oil rig and 4 natural gas rigs drilling in the US last week. While the oil rig count has seen some modest recovery so far this year, the decline in nat gas rigs last week puts the total at its lowest level since January 2022 as producers struggle with low prices while they anxiously await more export capacity to help US natural gas prices to start approaching those in the rest of the world.

A trio of refinery upsets were reported to TX regulators Friday.

Exxon reported an upset at its newly expanded Beaumont TX facility, although it’s unclear if operating units were forced to slow as a result.

Total meanwhile continues to struggle to get its Pt. Arthur facility back online, more than 2 months after the January cold snap, reporting a leak Friday that forced it to shut down a crude unit.

Valero reported an upset at its McKee refinery in the TX Panhandle, but it appears that only the facility’s flare gas recovery system was impacted so it shouldn’t have a notable impact on output.

Click here to download a PDF of today's TACenergy Market Talk.

Market TalkFriday, Mar 22 2024

Energy Futures Are Ticking Modestly Higher In Quiet Trading Friday Morning

Energy futures are ticking modestly higher in quiet trading Friday morning with politics and basketball taking over the headlines.

The financial times is reporting that US officials put pressure on Ukraine to stop attacking Russian refineries because they “Risk driving up global oil prices” and “nothing terrifies a sitting American president more than a surge in pump prices during an election year.” If true, that puts an interesting political spin on the situation as it gives Ukraine leverage to negotiate for the artillery they’ve been begging for to fight the war in their own country, and house republicans may be more apt to continue blocking that funding even though a majority in the Senate are ready to approve it. No word yet on if US officials have also asked nicely for Russia to stop attacking Ukrainian power plants.

Another big story in energy politics this week has been the announcements from the EPA on changing CAFÉ standards and EV emissions calculations. The delays in the standards appear to be a concession to the auto industry who has said that the previous targets were unattainable and would take away union jobs.

Sticking with the political theme this morning, the ranking member of the Senate’s Committee on Energy called out the IEA Thursday for abandoning the agency’s mission of promoting energy security and instead becoming a cheerleader for an energy transition. While the IEA is an “independent” group built to counter OPEC’s influence after the embargos 50 years ago, the US does provide a large amount of the funding that allows the agency to operate.

The EIA published an analysis on the South China Sea Thursday, highlighting the various disputes and conflicts that keep the region on edge. More than a third of all petroleum shipped by sea moves through the South China Sea, with a staggering 28 million barrels moving every day.

Pemex reported a leak at its 312mb/day Deer Park refinery that spilled oil into the Houston Ship channel Thursday, but the spill appears to be caused by a sump pump, and not a refining operating unit, so the news has been largely shrugged off.

Bracket busted? Don’t worry, you’re not alone.

Click here to download a PDF of today's TACenergy Market Talk.