Another eventful trading session for diesel prices witnessed before 8am, while gasoline futures only managed a pedestrian swing

Market TalkMonday, Apr 18 2022
Pivotal Week For Price Action

It’s been another eventful trading session for diesel prices with 11 cent gains and 6 cent losses both witnessed before 8 am, while gasoline futures have only managed a pedestrian 10 cent swing. Although product prices have pulled back sharply from their overnight highs, charts continue to favor higher prices in the weeks ahead, while fundamentals seem to offer demand destruction as the only option to end the rally near term.

The diesel contract lived up to its technical promise, moving sharply higher after breaking out of their triangle pattern on Thursday, reaching a high of $3.97 overnight before sellers stepped back in. The early morning trading has seen ULSD face a wave of selling even as RBOB and WTI bounce, suggesting there may be some spread unwinding taking place that’s holding diesel prices down after they rallied 75 cents in less than 5 days. 

Still cautious: Money managers continue to take only relatively small positions in petroleum futures and options as the extreme volatility we’ve experienced the past two months seems to be keeping many speculators on the sidelines. Open interest in refined products did see a healthy increase last week but remains near the lowest levels of the past decade.

Bullish or Bull headed? The producer/merchant category of trader has fewer short positions in diesel contracts now than they did in April of 2020.  Put that another way, diesel producers are hedging less of their production today when prices are near $4, than they were 2 years ago when they were less than $1. 

Baker Hughes reported a net increase of 2 oil rigs and 2 natural gas rigs active in the US last week, with Texas once again accounting for the majority of the increase. The White House announced over the weekend that it would resume oil leasing on Federal lands, although fewer acres are up for grabs, and royalty requirements have increased. 

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Market Update4-18-22

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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.

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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.

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