California Regulators Requiring Refineries To Improve Their NOx Emissions

Market TalkWednesday, Nov 10 2021
Pivotal Week For Price Action

West Coast gasoline values outpaced the rally across the rest of the country with CARBOB gaining more than a dime in both the LA and San Francisco spot markets. The big jump in CARBOB basis values to 8 month highs didn’t coincide with any new refinery disruptions, but it did come just 2 days following a ruling by California regulators requiring refineries improve their NOx emissions, which will cost billions to implement, and could force another plant or two to shut their doors.

The EIA raised its price outlook for crude oil in the latest Short Term Energy Outlook, and noted that fuel switching from natural gas to petroleum for electricity generation should continue pushing demand higher in the coming quarter. That said, the agency also increased its production estimates for next year as drillers race to take advantage of higher prices, which they predict will push prices lower in 2022. The report also highlighted the extreme backwardation in the price curve, noting that this type of price structure typically only happens following a severe supply disruption, whereas this time it’s been the fast recovery in global recovery that’s driven the tight supply. 

The API reported a draw in crude oil inventories of nearly 2.5 million barrels last week, snapping a 6 week streak of increases, while gasoline stocks dropped roughly ½ million barrels and diesel increased by about the same. That report gave prices a brief bounce in the afternoon, but failed to sustain the upward momentum overnight. The DOE’s report will be out at 9:30 central.

Ethanol looks like it may have made the turn lower after an insane rally of $1/gallon to start November pushed prices to all-time highs in some markets, although reports of logistical bottlenecks caused by rail and trucking delays are likely to continue to cause headaches until the winter demand slowdown takes hold. 

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Market Talk Update 11.10.21

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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.