Chaotic Trading Grips Pockets Of U.S. Equity Markets
Gasoline futures just broke above $1.60 for the first time since you first heard about COVID-19, after Reddit users decided to band together and punish those shorting the RBOB market. That’s not really why it happened. It just seemed fitting giving the headlines of the day. In reality, the chaotic trading that’s gripped pockets of U.S. equity markets this week hasn’t seemed to spill over into energy markets yet, which have been relatively quiet over the past few weeks during the steady climb higher.
After a slow overnight session there has been a bit of excitement just before 8 a.m. central, as refined products have rallied 2-3 cents off of small overnight losses, pushing which seems to be following a bounce in equities after the Q4 GPD estimate and initial jobless claims were released. If you’re wondering why equity and commodity markets might rally after a weaker than expected read on the economy, remember we’re back in the days of bad news can be good news as it will encourage more fiscal and monetary stimulus that props up prices.
RIN values continue to lend support to gasoline and diesel prices, as their steady march higher continued Wednesday. No word yet on if any hedge funds had been shorting RINs before this move, but as long as that rally continues it will put more pressure on refiners that don’t have their own blending capabilities. That seems to be a contributing factor for refined products setting new 11 month highs this morning while crude oil prices are still lingering just below technical resistance.
The DOE’s weekly status report showed the largest draw down in crude oil inventories in six months, which helped the entire complex wipe out the modest losses it had seen earlier Wednesday morning. The bounce was not able to sustain itself however as it became clear for those that could read beyond the headline numbers, that a one million barrel/day drop in imports, and a one million barrel/day increase in exports were the drivers of that big decline in inventories, not a surge in refinery runs and overall consumption. That suggests the drop is a short lived event and we should see a large bounce back in the next week or two as those trade flows stabilize.
Gasoline demand dipped and remains well below normal seasonal levels, roughly 1.1 million barrels/day (11%) below the prior five year average. Diesel demand meanwhile increased, and is holding near the five year average seasonal range, and impressive feat given the known reductions in diesel-consuming vehicles involved in mass transit. Refinery runs dipped slightly on the week, and are about 1.2 million barrels/day below where we’d expect them to be in late January most years.
Click here to download a PDF of today's TACenergy Market Talk.
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Week 48 - US DOE Inventory Recap
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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.