Black Friday Price Plunge in Energy Futures
A Black Friday price plunge in energy futures is being pared back in early Monday trading as most physical players return to their desks after the long holiday weekend. Refined product futures are up 3-4 cents on the day so far, meaning cash markets will only drop 3-4 cents from Wednesday should current values hold. The Friday selling was blamed on jitters ahead of the OPEC & Friends meeting this week, although the early recovery rally suggests it may have had more to do with a lack of liquidity than anything else.
The CFTC’s weekly Commitments of Traders report was delayed due to the holiday, so we won’t get a look at NYMEX holdings until this afternoon. Speculators did increase their bets on higher prices for Brent last week, indicating a growing appetite for risk as prices reached 2 month highs. No doubt those new longs were not enjoying Friday’s meltdown in prices, but may be breathing a sigh of relief if they held on until this morning.
Baker Hughes reported 3 more oil rigs were taken off-line in the US last week, a 6th consecutive weekly decline in the rig count. The slowdown in drilling activity has been well documented over the past several months, but it’s important to note that in-spite of the slowdown in new wells being drilled, US production just reached a new all-time high last week of 12.9 million barrels/day. Keep in mind that’s 1.2 million barrels/day more than the all-time record set this time a year ago, and it’s easy to see why the US remains on track to become a net exporter of petroleum after decades of being the world’s largest importer.
Speaking of changing petroleum trade dynamics, a new natural gas pipeline running from Russia to China has commenced operations, in the latest major shift to the East for Russian firms trying to avoid US sanctions.
We are now less than a month away from the official start of the IMO diesel spec change for ships. While the market reaction has been muted thus far, it’s worth noting that US diesel stocks are holding near the low end of their 5 year seasonal range, putting much of the country at risk of price spikes if there’s a surge in demand.
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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After Another Black Friday Selloff Pushed Energy Futures Sharply Lower In Last Week’s Holiday-Shortened Trading
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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.