Controversial Negotiations Over Gas Regulations

Market TalkTuesday, Aug 11 2020
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Energy and equity prices are both moving higher for a second day, as apparent optimism over COVID counts, potential stimulustax breaks and other rumored economic policies seem to be outweighing negative sentiment over the latest escalation in U.S./China tensions.   

While so far petroleum prices seem to be following macro factors, we’ll get a deluge of inventory data in short order to influence prices. In addition to the weekly inventory data, later today we’ll see the EIA’s Short Term Energy outlook, then we’ll get the IEA and OPEC monthly reports later in the week. 

Even though WTI is close to reaching a five-month-high, refined product prices are still stuck in their neutral pattern for now. In order to break out of the sideways trend we’ll need to see ULSD and RBOB both break and hold above the $1.30 mark. RBOB will face an even earlier test with the 200-day moving average currently at $1.2730 – a level of resistance that repelled the upward momentum in gasoline prices half a dozen times in July.

It is an election year: After negotiations at the White House, the EPA is reportedly planning to rescind some rules on methane gas regulations that would have widespread impact on testing for oil & gas drilling and shipping operations. The move is sure to be highly controversial, as environmental concerns continue to become mainstream and it appears that some major oil companies will oppose the easing of restriction.  This comes a week after the agency was also reportedly planning on recommending numerous small-refinery waivers to the RFS. That report helped send RINs sharply lower, but has not yet actually happened, the latest in a long line of White House/EPA negotiation rumors that hasn’t come to fruition.    

The EIA this morning published a note highlighting the drop in LNG exports from the U.S. this year. The EPA’s rumored change to methane rules could further complicate this issue as foreign buyers may require certain clean-energy protocols in order to purchase U.S. exports.  

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

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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
Pivotal Week For Price Action
Market TalkWednesday, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

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