Daily Coronavirus Market Teeter-Totter
After trading lower for most of Tuesday’s session, energy futures staged a strong rally in the last 15 minutes of trading before settlement and that upward momentum has carried through to this morning, in spite of inventory builds in crude and gasoline last week. In the daily coronavirus market teeter-totter, longer term vaccine optimism is winning over short term shutdown concerns today after another positive finding on Pfizer’s experimental drug.
The API reported a large build in crude stocks of 4.1 million barrels last week, while gasoline stocks increased slightly by 256,000 barrels. Distillates meanwhile had a large decrease of five million barrels on the week, consistent with the evidence we’re seeing in numerous markets in the Midwest, Rockies and South West that diesel supplies have suddenly become tight.
This situation feels similar to what we saw with the first round of shutdowns in the spring where gasoline demand reacted faster, and distillates were strong for another month or so, but then gasoline consumption recovered much faster. The DOE’s weekly report is due out at its normal time this morning, but it will likely take another week or two for the impact of the latest closures to show up in the nationwide data.
Another COVID refinery casualty? BP filed notice with Illinois and Chicago officials of possible layoffs exceeding the reporting threshold of 250 salaried employees. It’s unclear at this point if these layoffs might impact the office operations in Chicago or Naperville, IL, or if they could mean that some unit(s) could be closed at the Whiting, IN refinery, the largest production facility in PADD 2, and the sixth largest in the country.
Not done yet? After hurricane Iota became the second major hurricane pound central America in two weeks, the NHC is tracking two more potential storm systems today. The good news is both systems are given low (20%) odds of developing in the next five days. The bad news is several hurricanes in the parade of storms that ended up hitting the U.S. already this year started in similar fashion, so we’ll be stuck watching weather right through the end of the official hurricane season November 30 and probably beyond.
This hurricane season set records for the number of storms to form in the Atlantic basin, and the number of storms to hit the U.S. Coast. The EIA this morning highlighted the impact on Gulf of Mexico oil production, which dropped by the most in 12 years due to these storms. Numerous refineries were also shut down, some more than once, due to the parade of storms, and yet prices barely flinched due to the weak demand situation.
Click here to download a PDF of today's TACenergy Market Talk.
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Week 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Gasoline and oil prices are attempting to rally for a 2nd straight day, a day ahead of the delayed OPEC meeting, while diesel prices are slipping back into the red following Tuesday’s strong showing.
The API reported gasoline inventories dropped by 898,000 barrels last week, crude inventories declined by 817,000 barrels while distillates saw an increase of 2.8 million barrels. Those inventory stats help explain the early increases for RBOB and WTI while ULSD is trading lower. The DOE’s weekly report is due out at its normal time this morning.
A severe storm on the Black Sea is disrupting roughly 2% of the world’s daily oil output and is getting some credit for the bounce in futures, although early reports suggest that this will be a short-lived event.
Chevron reported that its Richmond CA refinery was back online after a power outage Monday night. San Francisco spot diesel basis values rallied more than a dime Tuesday after a big drop on Monday following the news of that refinery being knocked offline.
Just a few days after Scotland’s only refinery announced it would close in 2025, Exxon touted its newest refinery expansion project in the UK Tuesday, with a video detailing how it was ramping up diesel production to reduce imports and possibly allow for SAF production down the road at its Fawley facility.
Ethanol prices continue to slump this week, reaching a 2-year low despite the bounce in gasoline prices as corn values dropped to a 3-year low, and the White House appears to be delaying efforts to shift to E15 in an election year.
Click here to download a PDF of today's TACenergy Market Talk.
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.