Chart Support Survived A Big Wave Of Selling To Start The Week

Market TalkWednesday, Aug 3 2022
Pivotal Week For Price Action

Chart support survived a big wave of selling to start the week, and petroleum prices are now moving higher as buyers (or more likely the algorithms they’ve programmed) gain more confidence that a price breakdown is unlikely in the near future. RBOB gasoline futures are up more than 20 cents from Monday’s low trade, and back in the July trading range. ULSD prices are up 15 cents from Tuesday’s low, but need to get back above the $3.55 mark to break the descending triangle pattern that still threatens to push prices to $3 in the coming weeks. 

Early (and unofficial) reports from the OPEC & Friends meeting suggest the cartel will make a modest increase of 100,000 barrels/day to its quota in September. Oil and product prices actually moved higher following those rumors as the increase is the smallest on record for the cartel, and is essentially meaningless given that actual output has lagged behind the allowed quotas for the entire year. 

The API reported a build in crude stocks of 2 million barrels last week, while refined products were estimated to have small declines of less than ½ million barrels each. Keep in mind the build in oil stocks includes the ongoing drawdown of oil from the SPR, and all else being equal, would equate to a nearly 5 million barrel decline in US stocks if those barrels weren’t being released. The EIA’s weekly status report is due out at its normal time of 9:30 central.

While the shortage of refining capacity to meet fuel demand in the Western hemisphere has been well documented this year, the EIA on Tuesday published a note highlighting 9 new refinery projects slated to come online in the next 18 months, that will add nearly 3% to global refining capacity…all of which are in Asia and the Middle East, which will further shift the global flow of oil and its various products. 

While backwardation remains a major theme in global energy markets, for the first time in many months 2 US regions have actually slipped into a contango price curve for distillates.  Both Group 3 and Chicago ULSD prices are now trading higher for September delivery than they are for prompt barrels, which is a reflection of the lull in regional demand prior to the harvest season. This compilation of recent articles suggests you shouldn’t bet on this trend expanding to other markets. 

Click here to download a PDF of today's TACenergy Market Talk.

Market Talk Update 8.03.22

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Pivotal Week For Price Action
Market TalkThursday, Mar 28 2024

Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

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, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

Click here to download a PDF of today's TACenergy Market Talk.