Chinese Economic Data Cools Markets, Refinery Upsets Shrugged

Market TalkTuesday, Aug 8 2023
Pivotal Week For Price Action

Risk is off to start Tuesday’s session after bad import and export data from China seems to have spooked global equity and energy markets.

Chinese exports plummeted more than 14% in July (and that’s the number they want us to believe) marking the worst slowdown since the COVID lockdowns 3.5 years ago. Imports were also down more than 12%, with oil imports from the world’s largest buyer down sharply on the month, but still higher than a year ago. So far the sharp pullback hasn’t broken the up trend built over the past 6 weeks, but both RBOB and ULSD future are within just a few cents from some weekly chart support that could be the difference in this being a brief correction vs the start of a new downward trend.   

Today’s selloff comes despite multiple refinery hiccups in the past couple of days, with at least 3 Gulf Coast area refineries reporting units taken offline, which once again shows that futures seem to be more driven by financials lately than fundamentals. It’s still unclear if the persistent heat wave is causing the rash of upsets, but it’s safe to bet that it’s not helping matters

Trouble brewing in the South West? The dirty little secret known as Cleaner Burning Gasoline is starting to cause trouble again for the Phoenix market, with limited supply options for the boutique grade causing rack prices to rally once again. While we’re still a far cry from the huge spreads we saw last spring, and the current refinery hiccups are less significant than the dual turnarounds that caused those shortages, it’s likely we’ll see shippers once again shun diesel to move this gasoline grade to Phoenix, which could set the stage for the next supply squeeze.

Warbitrage: You know European natural gas stocks are well supplied when, traders are having to store it in Ukraine due to full tankage elsewhere. This is just the latest example of how most forecasts last fall calling for a dire winter of 2024 due to low gas supplies (which many feared would create another diesel shortage) seem to have got it all wrong. 

Jet Fuel from ethanol? That’s the rumor, according to a Reuters report noting that ADM and P66 are discussing a JV to find new ways to turn food into fuel.

Despite a WSJ article over the weekend noting the struggle oil producers are having hiring young engineers, and the steady decline in rig counts this year, the Dallas FED’s Texas Business Outlook showed strong job growth so far this year in the oil and gas industry.  Texas continued to see job growth outpace the rest of the country in most industries, thanks in large part to the continued strong net migration into the state. That report also noted how core inflation (excluding the big drop in energy prices) remains stubbornly high in the state, which is in part due to wage growth remaining well above average levels. 

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

Market Talk Update 08.08.2023

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Market TalkFriday, Mar 1 2024

Oil Futures Are Leading The Energy Complex In A Modest Rally To Begin March Trading

Oil futures are leading the energy complex in a modest rally to begin March trading, with WTI and Brent both up around $1.50/barrel, while refined products are adding around 2 cents in the early going.

RBOB gasoline futures rolled to a summer-grade RVP with the April contract in prompt position this morning. West Coast cash markets are already converted to summer grades, so they’re holding their premiums to futures, while the markets east of the Rockies are now trading at substantial discounts to futures as they move through their remaining winter-cycles over the next 4-6 weeks. The high trade for the April RBOB contract last month was just north of $2.63, which sets the first layer of resistance to a March madness gasoline rally just about 3 cents north of current values.

While gasoline looks somewhat bullish on the charts, and has seasonal factors working in its favor, diesel prices look weak in comparison with prices reaching a 6-week low Thursday before finally finding a bid, and the roll to April futures cut out 3 cents from prompt values. Diesel prices also don’t enjoy the seasonal benefits of gasoline, with a winter-that-wasn’t offering no help for supplemental diesel demand to replace natural gas in the US or Europe.

Speaking of winter weather, the West Coast continues to get the worst of it in 2024, with a casual 10 feet of snow with 100+ mile an hour wind gusts hitting the Sierra Nevada range. While the worst of that winter storm is happening far from the coast, the San Francisco bay area is under a gale warning starting this afternoon.

The wildfires in the Texas panhandle are now the largest in state history, impacting more than 1 million acres of land. The P66 Borger refinery is caught between the blazes, but so far has not reported any operational issues or plans to change operations at the facility. Valero’s McKee refinery is located just 50 miles from Borger, but looks to be far enough north and West to not be threatened by the fires, for now at least.

Mass Exxodus? A Reuters report noted that Exxon had notified its traders that it was cutting their salaries, in another sign that the major’s move back into trading wasn’t going so well. Exxon’s Exodus has already been a bit of a joke for the past few years, and now that the traders are being targeted, don’t be surprised if the cube photos are taken to a new level.

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

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