Crude Oil And Gasoline Prices Are Lower This Morning Than They Were On The First Day Of The Russian Invasion Of Ukraine

Market TalkFriday, Aug 5 2022
Pivotal Week For Price Action

Crude oil and gasoline prices are lower this morning than they were on the first day of the Russian invasion of Ukraine, as a breakdown in technical support and sentiment for consumption both seem to be pushing prices lower. RBOB and WTI were attempting to make small gains this morning after trading in negative territory overnight, but if the attempt to bounce doesn’t accelerate soon, the charts suggest we’re in for another wave of selling. 

Gulf Coast and Midwestern gasoline spot prices dipped below $2.50 on implied values overnight, which could mean retail prices below the $3 mark in some markets if values hold around this level for another week or more. Unless the market reverses course, more markets may join the sub $3 retail club in another 6 weeks as the transition to winter-spec gasoline ensues, and producers can once again start blending more butane, which is $1.25/gallon or more cheaper than gasoline.

Diesel prices resisted gasoline’s pull lower for the start of the week, but are catching up now that the bottom end of the descending triangle gave way, and quickly dropped another 12 cents after taking out that chart support before finding a temporary floor just above $3.20 overnight. Fundamentally, it’s difficult to make a case for diesel prices continuing to fall, especially with demand destined to ramp up in the fall.  Read here for another argument on why now may be a good time to buy ULSD.   

One headline that may explain why diesel prices are down more than a dime this morning even as gasoline prices were able to move into positive territory: Germany said it could keep its nuclear power plants operating this winter, which will help ease the shortage of natural gas and distillates needed to power the region. 

The July payrolls report knocked stock prices, along with gasoline and WTI, back into negative territory as another strong reading on the US job market seems to have spooked the machines that base their bets on easy money from the FED, which is sure to be encouraged by the fact that their first 4 interest rate increases haven’t hurt the labor market. Adding more than 550,000 jobs to the government estimate since the last report will also help the argument of those that say the US is not in a recession, despite 2 straight quarters of negative GDP growth.

The tropics remain eerily quiet as we approach the busy part of the Atlantic hurricane season. Officially, the NHC says no new tropical cyclones are expected in the next 5 days, but longer range models are already tracking 2 potential systems moving over Africa, that could develop as they move out to sea next week.  Colorado State’s latest forecast for the season was reduced by 2 named storms, but still suggests we’re in for a busy year with 16 more storms yet to come. The weather channel forecasters seem to agree noting yesterday that 90% of the storm activity is yet to come. 

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Market Talk Update 08-05-22

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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.