Concerns That Energy Shortage Will Derail Global Economic Recovery

Market TalkWednesday, Oct 6 2021
Pivotal Week For Price Action

Petroleum futures are pulling back this morning, after setting fresh 7 year highs overnight. Concerns that the energy shortage in parts of the world is going to derail the global economic recovery are taking blame for a wave of “risk off” selling this morning that’s hitting both energy and equity markets. While the correlation between US energy and equity markets has been close to zero during the past few weeks, there is a clear tick higher in volatility in both asset classes which is as good a gauge as any other for the fear that’s creeping into the marketplace after an extended period of calm.

For anyone that remembers the “staycation” effect when gasoline prices surged north of $4 in 2008, and what happened to the economy over the following year, it’s easy to understand why the cost of natural gas in Europe quadrupling over the past 3 months, or coal prices reaching record highs in Asia, is a bit concerning.   

The API reported inventory builds across the board Tuesday afternoon, which threw a bit of cold water on the runaway rally, although given that fresh highs were set overnight after the report, the market seems to not care too much about US stockpiles when Europe and Asia are struggling to make ends meet. The fact that domestic inventories are able to build even as substantial oil production and refining capacity remains offline following Hurricane Ida, proves once again the resilience of the US supply network, which is going to be leaned on perhaps more than ever to help alleviate the shortages elsewhere in the world.  

Speaking of which, an EIA report Tuesday detailed how a change in China’s tax policy has reduced imports of some petroleum products, and exports of others, which may be adding to the supply bottlenecks being felt in many markets.  The EIA’s weekly status report is due out at its normal time this morning, and following that report the agency will release its International Energy Outlook for the year.  A sneak peek at that report released this morning forecasts that despite the rapid increase of net-zero carbon pledges, and steady growth in renewables, petroleum liquids are expected to remain the primary source of global energy for the next 30 years. 

The Financial Times has an ongoing series on electric vehicles, and this Tuesday’s update on “how green is your Electric Car” gives one of the most concise, objective looks yet on the pros and cons of EVs– with the best visuals you’ve likely ever seen on this topic. 

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

Market Update 10.06.21

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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.