Bret Isn’t Expected To Impact Major Population Centers/ American Petroleum Institute Showing A Rise In National Gasoline Inventories
Energy futures are sinking this morning after yesterday’s rally, pointing to the seemingly omnipresent, if somewhat ambiguous, worries of a slowdown in global economic growth. In what looks awfully similar to mundane profit-taking, RBOB futures are down ~2.5% to start the day, followed by WTI and HO trading down 2% and 1%, respectively.
The hurricane that wasn’t: tropical storm Bret continues to churn in the western Atlantic and is projected to make landfall in the Lesser Antilles by tomorrow. The storm isn’t currently forecast to attain hurricane status as it passes into the Caribbean, however it is expected to strengthen as it continues westward. Bret isn’t expected to impact major population centers and/or energy infrastructure as it passes so eyes are now turning to its successor, affectionately named Tropical Depression Four, which is pointed at the Eastern Seaboard, but is still over a week away from making potential landfall.
Yesterday afternoon the American Petroleum Institute published their energy inventory estimates for last week, most notably showing a draw in national gasoline inventories of 2.9 million barrels. Our stockpile of oils were also projected lower with crude down 1.2 million barrels and distillates dropping 300,000 barrels. The Department of Energy’s official report is due out at 10am CDT this morning.
A slew of headlines surrounding the Renewable Fuel Standard and related programs were published yesterday. The EPA finalized their RIN compliance volume targets for 2023-2025, which saw a decrease in required Cellulosic, Advanced, and Renewable credits for 2024 and 2025. D4 and D6 RIN prices sank yesterday, each reaching the lowest levels seen in over a year. The EPA also announced its plans to meet with the Commodity Futures Trading Commission in the next month or so, aiming to crack down on market manipulators the agency claims to have evidence of.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllThe Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.
The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.
We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.
The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.
There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.
As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.
Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.