Crude Oil And Gasoline Prices Attempt To Regain Balance After Tuesday's Wipeout

Market TalkThursday, Mar 9 2023
Pivotal Week For Price Action

Gasoline and crude oil prices are trying to find their footing after Tuesday’s wipe out led to more modest selling on Wednesday, while diesel prices continue to languish just a few cents above their lows for the year. Yesterday’s DOE report did little to assuage the fears of recession that have been gripping markets this week with a big slide in demand estimates and inventories that are healing much faster than most predicted this year. 

The DOE’s estimate for diesel demand plummeted to the lowest level of the year last week, dropping far below its seasonal 5-year range. Gasoline also saw a decline in its demand estimate, dropping from a healthy top of range figure last week to below the 5-year average last week. While a single week’s data point from the DOE can be misleading, particularly the “implied demand” figures which are simply an estimate based on the remainders left behind from the other reported figures from suppliers, there is no doubt that the demand trend for 2023 is troubling for suppliers thus far. 

Refinery runs ticked modestly lower for a 4th straight week, but the changes are very small and amount to not much more than rounding errors.  The increased capacity at Exxon’s newly expanded Beaumont facilities are still not showing up in the numbers, despite reports that the new units are online, which suggests we could see a large increase in refinery runs in the coming weeks.  It’s also interesting that PADD 4 refinery runs dropped noticeably last week, despite the fact that Suncor is restarting its commerce city facilities after a 2-month shutdown.

Gasoline and diesel exports both saw healthy increases last week but remain in their seasonal ranges and not pushing record highs like they did for much of last year when the world started scrambling to replace Russian supplies. The EIA’s This week in Petroleum note highlighted the record setting exports of refined products from the US last year and detailed how Propane and HGL’s are taking more share of those product flows.

That report also shows that US retail prices for diesel dropped below year-ago levels last week, as pump prices finally caught up to the plunge in wholesale values this year and we’re now comparing prices to last year’s chaotic events that were smashing records for volatility and daily price swings.

US Crude oil inventories did see their first weekly decline of the year, even though refinery runs and exports both declined. Oil production did see a small decline, but the main driver was a huge drop of 2.6 million barrels/day in the “adjustment” factor on inventories for the week.   

French pension strikes continue to limit fuel output at several refineries, while some other facilities report they’ve still been able to operate this week. The lack of reaction from fuel prices compared to what we saw last fall is another example of how supplies have healed in the past 6 months, and how reactions to events can differ greatly depending on the trend in place at the time.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Market Talk Update 03.09.2023

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Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures

The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.

The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.

We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.

The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.

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

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day

The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.

There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.

As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.

Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.

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