August Futures Up More Than 40 Cents/Gallon From Their 4th Of July Lows

Market TalkWednesday, Jul 26 2023
Pivotal Week For Price Action

After a 1-day pullback, the rally has resumed for refined products as we await the latest FOMC announcement and the DOE weekly stats. 

Gasoline prices have now increased in 12 of the past 15 trading sessions, bringing August futures up more than 40 cents/gallon from their 4th of July lows.

ULSD prices managed to recover all of the early losses and finish with slight gains on the day, marking a 6th consecutive session of increases, with today making 7 if prices hold in the green. In addition to the bounce in futures we’ve seen some heavy buying in physical markets as well this week, with LA spot diesel hitting the highest basis values of the year, while Chicago ULSD has rallied to single digit discounts to ULSD futures after trading 30+ cents below earlier in the month.

The rally in refined products has pushed crack spreads to their highest levels since March, which is welcome news for refiners who have suddenly felt a bit of a reality check with supplies and margins returning to more normal levels in recent weeks. Then again, you have to be operating a refinery to enjoy the recent rally, and numerous unplanned outages – like this one in Memphis - have contributed to the move higher, so not everyone is celebrating.  

While refined products march higher, oil bulls aren’t quite ready to push prices north of $80, rallying to within a dime of that mark Tuesday before pulling back by more than $1/barrel. If the bulls can sustain a push above $80, there’s not much on the charts to stop a run at $90 in the back half of the year, with April’s high of $83.53 the only meaningful layer of prior resistance on the weekly chart. If we see oil prices fail to sustain this rally however, they will soon act as a major headwind to the rally in products given the extra refining capacity brought online around the world in the past year.

Speaking of which, it looks like the zombie refinery FKA Hovensa and Limetree bay may be given another chance to come back to life after a court ruled the EPA overstepped its authority (shocking) in requiring new permits before letting the new owners attempt to restart the facility. 

You can’t make this up:  protesters in Scotland concreted themselves to a road to block the country’s only refinery to protest its GHG emissions. Perhaps for their next trick the group will dump oil on the ground to protest the extreme amounts of CO2 released by concrete. 

The API reported builds in crude oil and diesel inventories of 1.3 and 1.6 million barrels respectively, while gasoline stocks dropped by 1 million barrels last week. The DOE’s weekly report is due out at its normal time this morning.

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Market Talk Update 07.26.2023

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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.