Another Fear On/Risk Off Day
It’s another Fear On/Risk Off day for energy and equity markets after the recovery rally ran out of steam Wednesday afternoon. The weekly inventory report from the DOE seemed to matter for about five minutes yesterday, as did the FOMC announcement, and then trading seems to have refocused on the unknowns of the coronavirus.
ULSD prices are leading the move lower again, and are facing an important test on the charts as they hover around one-year lows near $1.65. The last time they traded down to this level at the end of 2018, they rallied 25 cents in under two weeks. That said, there is little other support on the charts, so if prices can break and hold below this level, there could be another 20 cents of downside in short order.
A five percent drop in refinery runs was the most notable figure from the weekly DOE report, with rates dropping in four out of five PADDs. A variety of planned and unplanned maintenance events throughout the country – foreshadowed by strengthening basis values over the past week – help explain the large drop, while discretionary cutbacks due to plunging crack spreads could also be in play. Typical seasonal patterns suggest we should see refinery rates continue to drop for another two to three weeks before starting the annual spring ramp up.
Despite the cut back in refinery throughput, gasoline inventories reached a new record high last week, with the gulf coast glut growing for another week. Inventory levels on the East and West coasts are holding near or below their five year averages for this time of year, but the gulf coast now has nearly five million barrels more inventory than we’ve ever recorded prior to 2020. That excess in the gulf could lead to stronger values for shipping, whether that be over the water or on pipelines, as PADD three suppliers will be challenged to clear that excess ahead of the spring RVP transition.
Click here to download a PDF of today's TACenergy Market Talk.
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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.