Damage Assessments Begin After Hurricane Hits Louisiana

Market TalkMonday, Aug 30 2021
Pivotal Week For Price Action

September gasoline futures are up more than a nickel this morning, but most other contracts are lagging far behind as damage assessments begin after what could end up being the strongest hurricane ever recorded to hit Louisiana over the weekend. So far the market reaction suggests that traders acknowledge this was a huge, dangerous Hurricane but they don’t believe it will have a long-lasting impact on supply. 

The storm was worse than most forecasts going home Friday, reaching category 4 strength, and staying that way for more than 6 hours after making landfall Sunday afternoon. It will take a couple of days at least to assess damage and figure out what disruptions there may be to the supply network beyond the normal precautionary shutdowns and vessel delays.

Essentially all oil production in the Gulf of Mexico was shut down ahead of the storm, and so far this morning it looks like more than 2 million barrels/day of refinery capacity (just over 10% of the country’s total) has been shut down at least temporarily. Colonial pipeline shut its main lines 1 & 2 as a precaution while the storm passed, while the rest of its lines operate normally. Since none of Colonial’s origin points were directly in the path of the storm, it seems unlikely that the main lines will be down for long. 

Now that Ida is passing the refineries, it’s also worth considering the impact this storm could have demand as it’s expected to bring heavy rains to a huge part of the country as it makes its way north and east this week. Assuming Colonial comes back online later today, and none of the refineries sustained major damage, we could see a heavy selloff in prices as we being September trading.

Unfortunately Ida may not be the last of the storm activity for a while. The National Hurricane center is tracking 3 new potential systems in the Atlantic, 2 of which are given high odds of developing.    

In non-hurricane news, US Equities pushed to new record highs Friday after the FED chair calmed the nerves of investors worried that interest rates may be raised anytime soon. The message seemed to be that yes, the asset purchases (aka money printing) will start to end this year, but interest rates aren’t going up for a while.

Money managers continue to seem to have a hard time pegging petroleum futures, reducing net length across the board as of last Tuesday, and missing out on most of the big rally.  RBOB and ULSD contracts saw large reductions in both long bets and short bets last week, suggesting that the big speculators are growing tired of the whipsaw action. Those funds seem more comfortable betting on higher prices for environmental credits, with both CCA and RGGI contracts seeing more length added from money manager trade category last week. CCA’s saw a huge jump in prices to end the week after results from the August credit auction showed strong demand at lofty prices. 

Baker Hughes reported 5 more oil rigs were put to work last week, spread out across the country as producers continue their slow and steady recovery. 

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

Market Update 8.30.21

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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