Aggressive Goals For Vaccine Rollouts 

Market TalkTuesday, Jan 26 2021
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Gasoline prices rallied to fresh 11 month highs overnight, heading for a sixth straight day of gains, after the energy complex bounced off of trend support and erased early losses Monday. Relaxing COVID restrictions in New York and California, and aggressive goals for vaccine rollouts are all getting some credit for the rally. U.S. equity markets saw a similar bounce after some heavy early selling Monday, with markets choosing to focus on the potential for growth to come, rather than some weaker manufacturing data reported yesterday. 

Oil and diesel prices are also moving modestly higher after Monday’s recovery, and the bullish trend lines are still intact, but so far those contracts lack the enthusiasm seen in gasoline. WTI is just $1/barrel, and ULSD just $.02/gallon away from reaching their own 11 month highs, which would open up the charts to another 15-20 cents of upside. If they fail to break that ceiling however, they’re about to get squeezed by that rising trendline which could end up sparking a large selloff that should bring diesel prices back to the mid $1.40 range.

Good news for many U.S. refiners, the rally over the past several weeks has helped crack spreads recover to their best levels in nearly a year in some markets, after a brutal fourth quarter, which offers hope for the numerous companies struggling to make ends meet. The bad news is that RIN prices continue to rally, which is offsetting a large portion of those gains in processing margins for many of those plants, amid rising crop prices and expectations for a tougher stance by the EPA on renewable fuels.  

One curveball to ethanol advocates who cheer for higher RIN prices: The President’s new plan reduce carbon emissions includes transitioning the federal fleet to electric vehicles, not those that run on corn and soybeans. 

Looking for a fundamental reason why the rally could eventually run out of steam? Remember that refiners are still running well below capacity, and the Limetree Bay facility (formerly known as Hovensa) that’s been trying to start up for more than a year is finally producing finished products again, adding more supply to the Atlantic basin that really doesn’t need any more.  

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

Market Update 01-26-21

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Pivotal Week For Price Action
Market TalkThursday, Feb 29 2024

It's Another Mixed Start For Energy Futures This Morning After Refined Products Saw Some Heavy Selling Wednesday

It's another mixed start for energy futures this morning after refined products saw some heavy selling Wednesday. Both gasoline and diesel prices dropped 7.5-8.5 cents yesterday despite a rather mundane inventory report. The larger-than-expected build in crude oil inventories (+4.2 million barrels) was the only headline value of note, netting WTI futures a paltry 6-cent per barrel gain on the day.

The energy markets seem to be holding their breath for this morning’s release of the Personal Consumption Expenditures (PCE) data from the Bureau of Economic Analysis (BEA). The price index is the Fed’s preferred inflation monitor and has the potential to impact how the central bank moves forward with interest rates.

Nationwide refinery runs are still below their 5-year average with utilization across all PADDs well below 90%. While PADD 3 production crossed its 5-year average, it’s important to note that measure includes the “Snovid” shutdown of 2021 and throughput is still below the previous two years with utilization at 81%.

We will have to wait until next week to see if the FCC and SRU shutdowns at Flint Hills’ Corpus Christi refinery will have a material impact on the regions refining totals. Detail on the filing can be found on the Texas Commission on Environmental Quality website.

Update: the PCE data shows a decrease in US inflation to 2.4%, increasing the likelihood of a rate cut later this year. Energy futures continue drifting, unfazed.

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, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

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