Cautious Push Higher Continues Today
The slow and cautious push higher continues today as diesel prices attempt to lead a push through the top end of the trading range that’s held the energy complex since June. ULSD futures are trading higher for a fifth straight day after reaching their highest settlement since July, but have still not yet been able to crack the $1.30 mark. Oil and gasoline prices have also been moving higher, but the moves over this entire week are less than what we would have expected in a single day last spring, and indicate the cautious nature of any optimism this year.
The correlation between daily moves in energy and equity prices has strengthened in the past few weeks as the markets have become fixated on the vaccine race versus the new shutdown orders amidst record COVID case counts. Ultimately, whether or not stocks can continue their recent march higher may determine if we see a breakout to the upside in energy futures, or if prices will fall back into their range yet again.
The move higher in ULSD over the past couple of weeks has helped diesel margins for refiners, but that’s largely been offset by weakness in gasoline, keeping the rough estimates of refinery profitability near breakeven levels. The forward curve looks better for the facilities that can weather this storm, although numerous reports suggest we’re likely to see more refinery closures in Europe and/or the U.S. before this is over. Asian refiners meanwhile seem to be doing well which creates a new shift in global logistics for crude and refined products that is expected to help tanker rates and ship operators.
A new bill known as the “Streamlining Advanced Biofuels Registrations Act” was proposed this week, in an attempt to force the EPA to consider applications for cellulosic biomass fuel producers. While this bill may have minimal if any impact on supplies near-term, it is a good reminder of why Georgia is looking like the most important state for fuel producers in 2021 as control of the Senate hangs in the balance. D4 RINs continue to hold near three-year highs around 90 cents/RIN, while D6 ethanol RINs have retreated in the past week, along with ethanol prices.
Click here to download a PDF of today's TACenergy Market Talk.
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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.