A Strong Start To July

Market TalkThursday, Jul 1 2021
Pivotal Week For Price Action

It’s a strong start to July with refined products rallying more than a nickel in the early going, and crude oil prices reaching fresh 2.5 year highs. The OPEC meeting is underway and will likely create some volatility today as rumors start trickling out of the meeting ahead of the official announcement. 

Tropical storm Elsa has formed in the Atlantic, and looks like it will hit Florida early next week. It’s still early in the season so the waters haven’t reached their warmest levels yet which should keep this storm from reaching hurricane strength. The forecast cone currently keeps the storm east of the oil refining and production region of the Gulf of Mexico, and if that holds, this should not be a supply threat beyond some headaches in the ports as the storm passes. 

Wednesday’s DOE report added to the bullish sentiment for oil as US inventories saw another large decline, a 6th straight week of falling inventories, and one of the largest monthly declines on record. Total US Petroleum demand climbed for a third straight week and is holding above its seasonal average for this time of year. The exception in the report was gasoline, which saw a drop in the weekly demand estimate and a build in inventories. The DOE also reduced its gasoline demand estimates from the spring in its latest monthly update, although that’s done little to stop the rally as RBOB futures just reached their highest level in nearly 7 years in the past few minutes.

The exception to the weaker gasoline fundamentals is the PADD 4, which has by far the fewest people and thus the least amount of gasoline of the districts and is typically ignored in the weekly statistics given its volume amounts to a rounding error. This week however it could be the canary in the coal mine for the industry as it deals with the resumption in demand following so many refinery closures in the past year. Regional inventories have dropped to their lowest levels in nearly a decade as Colorado’s sole refinery struggles through a turnaround, and 2 of the main backup options nearby are no longer operating as oil refineries.

RINs have been uncharacteristically quiet the past couple of days after the Supreme Court ruling rippled through the market Friday and Monday. That relative lack of volatility may not last long however as grain prices saw a strong rally following the USDA’s crop report which showed fewer acres planted than many reports expected, setting the stage for stronger values in the back half of the week.

Abandoning ship: Shell continues to shed assets, with a sale of its share in a California production JV coming according to a new Reuters report. Meanwhile, Chevron is looking to sell some of its stake in the Permian, which should provide a good test of the new theory that US producers are showing discipline in their spending even now that prices are near 3 year highs pushing companies back into the black.

The EIA this morning published a note highlighting that non-fossil fuel sources reached 21% of total energy consumption in the US last year, the highest levels in more than a century, when wood was the renewable energy of choice. The report does point out that Nuclear power remains the largest non-fossil fuel category by usage, while petroleum’s share has held relatively steady the past several years. Those various sources of energy are facing multiple tests this week as temperatures & electricity usage have surged from coast to coast.  

Another EIA report yesterday highlighted vulnerable areas of the country’s power grid this summer, with the majority of the country listed as an elevated or high risk of outage. New York was one of the relatively few states given a low risk status in the report, and right on cue, government officials are calling for conservation this week as the heat wave is giving their grid a tough test.

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

TACenergy Market Update 070121

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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.