Another Soft Start For Energy Markets

Market TalkFriday, Feb 12 2021
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It’s another soft start for energy markets Friday as the upward momentum has waned in the back half of the week. Although most prices are still modestly in the red (March RBOB did manage to turn positive around 8 a.m.)  we’ve already seen refined products bounce 1.5 cents off of their overnight lows, and they haven’t yet even tested the upward-sloping trendline, so it’s still too soon to call an end to the 3.5 month old bull market, which marks the longest sustained rally in two years.

A rally in the U.S. Dollar is getting some of the credit for the pullback in oil prices, even though the correlation between the two has been strongly positive for much of the past month, reversing the normal relationship. A pullback in equity markets after reaching fresh record highs this week is also getting some credit for the pause in the rally, and the correlation between daily moves in the S&P 500 and WTI remains north of 80%.

OPEC’s monthly oil market report showed the cartel’s total output increased by 181,000 barrels/day in January, with increases from Saudi Arabia, Venezuela and Iran offsetting decreases in Libya and Nigeria. We should see a sharp drop in output soon as Saudi Arabia prepares its unilateral production cuts it announced when it couldn’t convince the Friends of OPEC alliance led by Russia to cut output to avoid flooding the fragile market with supply. Like all of the other monthly reports released this week, OPEC expects an acceleration in demand growth in the back half of the year but the full year demand estimates were revised slightly lower from last month due to extended lockdowns.

Did you know refinery-effect snow was a thing? It happened this week in Denver, and based on the forecast, some plants in TX and LA could experience something like this next week, that is if they’re still able to operate through the record-setting cold that’s forecast for parts of the country that don’t insulate their pipes. Expect to see some terminal and/or refinery disruptions if the forecasted temperatures materialize across the south, not to mention the likelihood that trucks may breakdown if they leave their diesel untreated for the cold.

Monday is President’s Day, so spot markets will not be assessed, and most rack prices will carry through from tonight until Tuesday. NYMEX contracts will trade in an abbreviated session on Monday, but there will not be a settlement. 

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Market TalkWednesday, Nov 29 2023

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.

Pivotal Week For Price Action
Market TalkTuesday, Nov 28 2023

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.