Another Day Another Round Of 7 Year Highs
Another day, another round of 7 year highs for Nymex energy contracts. Refined products are leading the way higher again this morning with calendar and crack spreads both strengthening following a large decrease in refinery runs reported yesterday by the DOE, and aided once again by stronger RIN values. The charts continue to favor more upside, with a run at $90 crude still looking likely.
In addition to the now-standard supply squeeze justification for the steady march higher, yesterday we saw space on Colonial’s main gasoline line drew a positive value for the first time since the cyber-attack in May as the pipeline was allocated for the first time in more than a year. Historically, the 4th quarter has drawn some of the strongest values for space on Colonial’s mainlines, when they used to be allocated anyway, as the Gulf Coast will typically become long in the winter and open the arb to the east coast.
That said, this could be a short term phenomenon caused by the Plantation downtime as shippers look to alternate options to get caught up, rather than a return to the days when CPL space regularly traded for big premiums. New York harbor spots are severely backwardated, with nearly 5 cents of value for product available today vs 2 weeks from now, which also suggests the market sees a short term squeeze on supplies, and once that squeeze is over, we may see an end to the rally in futures as well.
Refiners slashed run rates in 4 out of 5 PADDs last week, with total US run rates dropping more than 4% on the week. That type of move is typically caused by a major disruption like a hurricane, but in this case it seems to have been caused by a combination of planned maintenance and unplanned upsets. We have also seen numerous refiners defer or delay maintenance in the aftermath of Hurricane Ida.
The tropics remain quiet with 6 weeks left in the hurricane season. Currently there’s only one system being tracked by the NHC, but it’s given almost no chance of developing and it’s position makes it a non-threat to the US. That said, a La NIna system in the Pacific has formed, which could increase the odds of more storms forming before this season comes to an end.
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Week 48 - US DOE Inventory Recap
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Week 48 - US DOE Inventory Recap
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.
Click here to download a PDF of today's TACenergy Market Talk.
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.