Energy Futures Pulled Back From Multi-Year Highs Set In Tuesday's Session

Market TalkWednesday, Oct 27 2021
Pivotal Week For Price Action

Energy futures pulled back from multi-year highs set in Tuesday’s session as inventory builds and bad weather both appear to be dampening the bullish enthusiasm. Although we’ve seen several similar short-lived pullbacks over the past few weeks, charts are showing signs of a potential rounding top, that could mean sharply lower prices in the weeks ahead if we don’t see a bounce in the next few days.  Of course, it’s too soon to make that call, and we’ll need to see another pullback of 5% or more before the bullish trend can be called broken.

The pullback in futures didn’t get moving until around midnight, well after the API reported its inventory levels for the week Tuesday afternoon, and yet those stock builds are getting some of the credit for today’s selling. Based on the timing of the pullback, it seems like that part of the selling was caused by the realization that even though there were numerous refinery hiccups on the West Coast, and multiple power outages at terminals on the East Coast, the severe weather sweeping the country this week is ultimately likely to have a more negative impact on fuel demand than supply. 

Zombie Storm?  The NHC is giving 40% odds that this Nor’easter could develop into a named storm after moving off the US Coast later this week. Fortunately, it does not appear that this storm will come back to haunt the coast on Halloween as the path keeps it moving east and away from shore…for now.

The API reported inventory builds across the board last week, with crude oil stocks up 2.3 million barrels, diesel up just under 1 million barrels, and gasoline up by about ½ million. The EIA’s weekly report is expected at 9:30 this morning. One interesting note from the API report, even though total US crude stocks have been steadily building over the past month, stocks at the Cushing OK hub (which is the delivery point for the WTI futures contract) continue to decline.   This phenomenon could create a scenario where the short squeeze in futures drives WTI sharply higher, even while physical markets elsewhere aren’t feeling the squeeze.  Long term, this may continue to drive liquidity to the Houston-based contracts that have been gaining popularity in recent years.   

Meanwhile, the EIA’s winter fuels outlook is predicting higher expenditures for all heating fuels this winter as prices for many energy contracts are already at multi-year highs even before the first rounds of cold weather start to hit parts of the country this week. The report also highlights how the pull from overseas is contributing to tighter than average supplies. (Charts below)

Looking for a reason to buy this latest dip in prices?  Saudi Aramco warned that spare capacity is rapidly dwindling, suggesting it’s unlikely that OPEC changes its resupply stance when they meet next week. 

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

Market Talk Update 10.27.2021

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Pivotal Week For Price Action
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.

Pivotal Week For Price Action
Pivotal Week For Price Action
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.