Another Day, Another 60 Cent Swing In Diesel Prices

Market TalkWednesday, Mar 9 2022
Pivotal Week For Price Action

Another day, another 60 cent swing in diesel prices. Last week, ULSD futures set a record with a 34 cent price increase and a 45 cent trading range in 1 day, and this week, we’ve already seen a 51 cent increase followed by an 60 cent drop this AM. To put that in perspective, there had only been 3 months since 1999 that have experienced a 70 cent trading range, and we’ve already had an 87 cent swing this morning.  

Gasoline futures haven’t been quite as volatile as ULSD, but still the past 7 trading days all rank in the top 10 all time for biggest swings on the gasoline contract.  West Coast physical gasoline has surged well beyond futures as a rash of new refinery hiccups, and the loss of a crude import option from Eastern Siberia seemed to combine Tuesday to send spot values north of $4/gallon, nearly 80 cents above priced in the middle of the country.

While East Coast gasoline prices are 50 cents or more below their West Coast cousins, there have been multiple terminal outages reported in the past 24 hours as cargoes destined for the US have been diverted to Europe, putting strain on the NYH barge system. These extremes on the coasts create the first real test for US consumers that have railed against receiving Russian crude and product imports, and now are getting their wish.

The API reported a large decline in US diesel inventories last week of nearly 5.5 million barrel, which seemed to help ULSD continue surging to a fresh all-time high late Tuesday afternoon, but is an afterthought this morning as diesel prices now are experiencing their biggest single day drop in history (47 cents) 1 day after they experienced their biggest daily increase of 51 cents. The DOE weekly report will be released at its normal time this morning, and you’ll be forgiven if you don’t pay attention to it.

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Market Talk Update 3.9.22

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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.