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 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.