CFTC Releases Study On Climate Change
After a solid recovery bounce Wednesday, oil and diesel prices are back on the defensive this morning following some bearish inventory reports. Volatility has made a big comeback after an extended summer lull, and market activity suggests that more traders are betting that trend will continue.
RIN values spiked again during Wednesday’s trading, pushing D4 values to a new 2.5 year high, following a report Tuesday night that the White House was pushing the EPA to deny small refinery waivers, just days after two refiners made their case for those waivers to the Supreme Court.
The API was said to show builds in oil and distillate stocks of 2.9 and 2.3 million barrels respectively, while gasoline stocks saw a large decrease of 6.9 million barrels ahead of the holiday. Those moves help explain why RBOB prices are holding close to flat on the day while WTI and ULSD are down around 1.5 percent. The DOE’s weekly report is due out at 10 a.m. central.
The EIA’s monthly report (STEO) decreased its global demand outlook for fuels from the August report, putting most of the blame on a slowdown in activity in China. The report continues to paint a gloomy outlook for refiners with crack spreads holding around break-even levels.
The Atlantic ocean looks more like a game of battleship on the National Hurricane Center map, with seven tropical systems all being tracked today. Three of these are just off the U.S. Coast, but none of those three are given good odds of development. The two named storms still look to be staying out to sea, while two other systems could become threats next week.
The Commodities Futures Trading Commission (CFTC) released a study on climate change that was supported by numerous industry representatives such as the CME Group (NYMEX parent), ConocoPhillips and Cargill. The report highlights the economic risks of climate change and pushes for the U.S. to establish a price on carbon that’s consistent across industries and regions. What does that mean to you? Most likely, it means you’ll have to add another variable to your fuel price calculations in the next few years.
Notes from the CFTC climate report:
This report begins with a fundamental finding—financial markets will only be able to channel resources efficiently to activities that reduce greenhouse gas emissions if an economy-wide price on carbon is in place at a level that reflects the true social cost of those emissions. A central finding of this report is that climate change could pose systemic risks to the U.S. financial system.
We recommend that: The United States should establish a price on carbon. It must be fair, economy-wide, and effective in reducing emissions consistent with the Paris Agreement. This is the single most important step to manage climate risk and drive the appropriate allocation of capital. (Recommendation 1).
Click here to download a PDF of today's TACenergy Market Talk.
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
Energy Futures Are Drifting Quietly Higher This Morning
Refined Products Holding Close To Break Even While Oil Prices Are Losing Just Under 1%
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
The energy complex is trading modestly lower so far this morning with WTI crude oil futures leading the way, exchanging hands $1.50 per barrel lower (-1.9%) than Tuesday’s settlement price. Gasoline and diesel futures are following suit, dropping .0390 and .0280 per gallon, respectively.
A surprise crude oil build (one that doesn’t include any changes to the SPR) as reported by the American Petroleum Institute late Tuesday is taking credit for the bearish trading seen this morning. The Institute estimated an increase in crude inventories of ~5 million barrels and drop in both refined product stocks of 1.5-2.2 million barrels for the week ending April 26. The Department of Energy’s official report is due out at it’s regular time (9:30 CDT) this morning.
The Senate Budget Committee is scheduled to hold a hearing at 9:00 AM EST this morning regarding a years-long probe into climate change messaging from big oil companies. Following a 3-year investigation, Senate and House Democrats released their final report yesterday alleging major oil companies have internally recognized the impacts of fossil fuels on the climate since as far back as the 1960s, while privately lobbying against climate legislation and publicly presenting a narrative that undermines a connection between the two. Whether this will have a tangible effect on policy or is just the latest announcement in an election-yeardeluge is yet to be seen.
Speaking of deluge, another drone attack was launched against Russian infrastructure earlier this morning, causing an explosion and subsequent fire at Rosneft’s Ryazan refinery. While likely a response to the five killed from Russian missile strikes in Odesa and Kharkiv, Kyiv has yet to officially claim responsibility for the attack that successfully struck state infrastructure just 130 miles from Moscow.
The crude oil bears are on a tear this past week, blowing past WTI’s 5 and 10 day moving averages on Monday and opening below it’s 50-day MA this morning. The $80 level is likely a key resistance level, below which the path is open for the American oil benchmark to drop to the $75 level in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Energy Futures Are Drifting Quietly Higher This Morning
Energy futures are drifting quietly higher this morning as a new round of hostage negotiations between Israel and Hamas seem to show relative promise. It seems the market is focusing on the prospect of cooler heads prevailing, rather than the pervasive rocket/drone exchanges, the latest of which took place over Israel’s northern border.
A warmer-than-expected winter depressed diesel demand and, likewise, distillate refinery margins, which has dropped to its lowest level since the beginning of 2022. The ULSD forward curve has shifted into contango (carry) over the past month as traders seek to store their diesel inventories and hope for a pickup in demand, domestic or otherwise.
The DOE announced it had continued rebuilding it’s Strategic Petroleum Reserve this month, noting the addition of 2.3 million barrels of crude so far in April. Depending on what the private sector reported for last week, Wednesday’s DOE report may put current national crude oil inventories (include those of the SPR) above the year’s previous levels, something we haven’t seen since April of 2022, two months after Ukraine war began.
The latest in the Dangote Refinery Saga: Credit stall-out, rising oil prices, and currency exchange.
Click here to download a PDF of today's TACenergy Market Talk.