Black Friday Took On A New Meaning This Year
Black Friday took on a new meaning this year as markets around the world were pummeled by fears of a new COVID variant that prompted new lockdowns and travel restrictions around the world. The petroleum futures complex ended Friday with its biggest daily selloff in 19 months (you may remember April 2020 when WTI traded in negative territory) but since spot markets were closed for Thanksgiving, the 12% drop in futures didn’t carry over to physical prices in the US yet.
This morning we’re seeing a sigh of relief rally in both energy futures and equity markets as the drug makers signal confidence that Omnicron can be dealt with in a relatively short time frame, although only about 1/3 of Friday’s losses have been erased so far, suggesting the market still has major concerns.
From a technical perspective, we’ve been saying for some time that refined product charts looked like they could get a 20-30 cent sell-off, we just didn’t expect to see it happen in a single day. Now that the big flush lower is in the rearview mirror and an 11 cent bounce has already happened, we’re set up with a new range to determine the direction of our next trend. If Friday’s lows get taken out ($2.02 for RBOB and $2.09 for ULSD) there’s a good chance we see another 20 cent drop. On the upside, we’ll need to see the previous support around the $2.18 range for RBOB and $2.26 for ULSD be surpassed to get the charts to a more neutral footing heading towards year end.
The CFTC’s weekly report on NYMEX positions was delayed due to the holiday and won’t be released until this afternoon, but Brent and Gasoil contracts both saw heavy liquidation by money managers, suggesting the big funds may have already been heading for the exits well before things got exciting last week. Keep in mind that the data released today will be as of Tuesday Nov 23, so we won’t see how traders weathered Friday’s storm until the end of this week.
In less exciting news, the attempt to put a Cap & Trade program on transportation fuels across New England seems to have failed as the governors of Massachusetts and Connecticut both signaled they would no longer support the plan known as TCI in the face of already high gasoline prices (and an election year).
Unplanned refinery downtime continues to create many challenges for regional supply networks with the refinery in Toledo OH reportedly needing months to make repairs after an explosion and fire last week, while the flooding that swept across the Pacific North West forced a plant in BC to shutter until crude supplies can be restored. Last week’s DOE report showed that many plants are returning after a busy fall maintenance schedule, which should help limit the impact of these latest disruptions.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllEnergy Prices Fluctuate: Chinese Imports Surge, Saudi Arabia Cuts Output and Buys Golf
Energy prices continue their back-and-forth trading, starting Wednesday’s session with modest gains, after a round of selling Tuesday wiped out the Saudi output cut bounce.
A surge in China’s imports of crude oil and natural gas seem to be the catalyst for the early move higher, even though weak export activity from the world’s largest fuel buyer suggests the global economy is still struggling.
New tactic? Saudi Arabia’s plan to voluntarily cut oil production by another 1 million barrels/day failed to sustain a rally in oil prices to start the week, so they bought the PGA tour.
The EIA’s monthly Short Term Energy Outlook raised its price forecast for oil, citing the Saudi cuts, and OPEC’s commitment to extend current production restrictions through 2024. The increase in prices comes despite reducing the forecast for US fuel consumption, as GDP growth projections continue to decline from previous estimates.
The report included a special article on diesel consumption, and its changing relationship with economic activity that does a good job of explaining why diesel prices are $2/gallon cheaper today than they were a year ago.
The API reported healthy builds in refined product inventories last week, with distillates up 4.5 million barrels while gasoline stocks were up 2.4 million barrels in the wake of Memorial Day. Crude inventories declined by 1.7 million barrels on the week. The DOE’s weekly report is due out at its normal time this morning.
We’re still waiting on the EPA’s final ruling on the Renewable Fuel Standard for the next few years, which is due a week from today, but another Reuters article suggests that eRINs will not be included in this round of making up the rules.
Click here to download a PDF of today's TACenergy Market Talk.
Week 23 - US DOE Inventory Recap
Energy Prices Retreat, Global Demand Concerns Loom
So much for that rally. Energy prices have given back all of the gains made following Saudi Arabia’s announcement that it would voluntarily withhold another 1 million barrels/day of oil production starting in July. The pullback appears to be rooted in the ongoing concerns over global demand after a soft PMI report for May while markets start to focus on what the FED will do at its FOMC meeting next week.
The lack of follow through to the upside leaves petroleum futures stuck in neutral technical territory, and since the top end of the recent trading range didn’t break, it seems likely we could see another test of the lower end of the range in the near future.
RIN prices have dropped sharply in the past few sessions, with traders apparently not waiting on the EPA’s final RFS ruling – due in a week – to liquidate positions. D6 values dropped to their lowest levels in a year Monday, while D4 values hit a 15-month low. In unrelated news, the DOE’s attempt to turn seaweed into biofuels has run into a whale problem.
Valero reported a process leak at its Three Rivers TX refinery that lasted a fully 24 hours. That’s the latest in a string of upsets for south Texas refineries over the past month that have kept supplies from San Antonio, Austin and DFW tighter than normal. Citgo Corpus Christi also reported an upset over the weekend at a sulfur recovery unit. Several Corpus facilities have been reporting issues since widespread power outages knocked all of the local plants offline last month.
Meanwhile, the Marathon Galveston Bay (FKA Texas City) refinery had another issue over the weekend as an oil movement line was found to be leaking underground but does not appear to have impacted refining operations at the facility. Gulf Coast traders don’t seem concerned by any of the latest refinery issues, with basis values holding steady to start the week.
Click here to download a PDF of today's TACenergy Market Talk.