After A Heavy Sell-Off Monday, Gasoline And Diesel Futures Are Both Up 7 Cents Or More

Market TalkTuesday, Jun 14 2022
Pivotal Week For Price Action

After a heavy sell-off Monday, gasoline and diesel futures are both up 7 cents or more in early Tuesday trading as OPEC reminded the world that it’s still not coming to the rescue, and the tight refining capacity situation may get worse before it gets better. Stock markets are also showing signs of stabilizing with modest gains in the early going after another big selloff yesterday, which seems to be keeping the “risk off” sellers at bay.

OPEC’s monthly report lowered estimates for global GDP growth this year, but increased forecasts for fuel consumption in the back half of the year, predicting strong demand during the summer holiday and driving season in spite of record high prices. Despite the cartel’s plans to increase output every month, their actual crude oil production decreased in May as losses in Libya and Nigeria offset additional barrels pumped by Saudi Arabia and the UAE. 

Bad news on refinery row?  Lyondell announced in April that it was planning to shut down its 268mb/day Houston Refinery by the end of 2023, and last week a report suggested that closure would happen earlier if there was a disruption that required significant capital to fix.  Today there are reports of a fire at that facility, so we may soon take yet another US refinery off the board if the damage is significant.  

The NHC now gives 40% odds of development for a storm system in the Western Caribbean, but odds are much lower that this system will become a threat to refining country even if it does get a name.

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Market Talk Update 06.014.2022

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Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Nov 29 2023

The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week

Gasoline and oil prices are attempting to rally for a 2nd straight day, a day ahead of the delayed OPEC meeting, while diesel prices are slipping back into the red following Tuesday’s strong showing. 

The API reported gasoline inventories dropped by 898,000 barrels last week, crude inventories declined by 817,000 barrels while distillates saw an increase of 2.8 million barrels. Those inventory stats help explain the early increases for RBOB and WTI while ULSD is trading lower. The DOE’s weekly report is due out at its normal time this morning. 

A severe storm on the Black Sea is disrupting roughly 2% of the world’s daily oil output and is getting some credit for the bounce in futures, although early reports suggest that this will be a short-lived event. 

Chevron reported that its Richmond CA refinery was back online after a power outage Monday night. San Francisco spot diesel basis values rallied more than a dime Tuesday after a big drop on Monday following the news of that refinery being knocked offline.

Just a few days after Scotland’s only refinery announced it would close in 2025, Exxon touted its newest refinery expansion project in the UK Tuesday, with a video detailing how it was ramping up diesel production to reduce imports and possibly allow for SAF production down the road at its Fawley facility. 

Ethanol prices continue to slump this week, reaching a 2-year low despite the bounce in gasoline prices as corn values dropped to a 3-year low, and the White House appears to be delaying efforts to shift to E15 in an election year. 

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Pivotal Week For Price Action
Market TalkTuesday, Nov 28 2023

Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week

The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday. 

Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.

Reversal coming?  Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.

Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness. 

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