Diesel Futures Are Trying To Drag The Energy Complex Lower To End The Week

Market TalkFriday, Feb 16 2024
Pivotal Week For Price Action

Diesel futures are trying to drag the energy complex lower to end the week losing about a nickel in early trading as refinery restarts and sluggish demand both put downward pressure on prices that have lost more than 20 cents on the week. RBOB futures are reluctantly following ULSD’s lead so far, down around 3 cents so far, while WTI is clinging to small gains.

WTI had its highest settlement since November Thursday, just north of $78/barrel, and came within 2 cents of reaching a 3-month intra-day high overnight. IF WTI can break and hold above this $78 range, the charts suggest there is a good chance we’ll see a run at the $85 level in the next few weeks, while a failure spells more sideways action.

Natural gas prices have fallen to their lowest levels since the depths of the pandemic this week, removing a bid from the diesel market as heating supply remains ample without supplementing with ULSD.

Today’s PPI report confirmed the stubborn-inflation theme that the CPI report started Tuesday, which led to heavy selling in equities. Stocks are pointed lower again to start the session and are threatening to give up their hard-earned gains for the week.

Reports that BP is restarting its Whiting refinery after being offline for 2 weeks seems to be contributing to the weak action in products this morning. If all goes well on that startup, which is the most vulnerable time for a refinery, they should be back to normal operations in about a week. In addition to the BP restart, Total’s Pt. Arthur TX plant is reportedly in restart after a failed attempt to get back online 2 weeks ago. That facility has been offline since the January freeze.

Cenovus joined PBF Thursday in reporting a loss in its refinery operations in Q4 of 2023, ending an otherwise strong year on a weak note. Unlike PBF however, Cenovus was able to lean on profitable oil production operations to keep total profits positive, but that didn’t stop the company from reducing run rates at its US facilities due to the “…exceptionally weak refined products pricing environment in December…”

Flint Hills reported a leak in a pressure relief valve at the Corpus Christi West refinery yesterday, although outside of a brief flaring event operations don’t seem to have been impacted and the valve was replaced according to the filing.

Union workers at Marathon’s Detroit facility voted to strike over wage negotiations this week, but only if negotiations break down. Marathon seemed to shrug off that threat, saying they were prepared to operate the facility without the union employees. Given the excess supply in the region lately, and the struggle for some facilities just to break even, it doesn’t seem like the union has the ideal amount of leverage at the moment. 

Chevron and Marathon both reported unplanned flaring at their LA-area refineries Thursday, continuing a string of nearly a dozen upsets reported to the AQMD since the heavy rains started nearly 2 weeks ago. So far, those unplanned events don’t seem to be hurting operations, at least not as much as the rain has hurt demand, as diesel basis values dropped more than a nickel in LA this week.

Today’s interesting read from Reuters: Why the flurry of M&A in Oil production isn’t helping US refiners offload their aging assets.

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

Market Talk Update 02.16.2024

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Pivotal Week For Price Action
Market TalkFriday, Apr 19 2024

Gasoline Futures Are Leading The Way Lower This Morning

It was a volatile night for markets around the world as Israel reportedly launched a direct strike against Iran. Many global markets, from equities to currencies to commodities saw big swings as traders initially braced for the worst, then reversed course rapidly once Iran indicated that it was not planning to retaliate. Refined products spiked following the initial reports, with ULSD futures up 11 cents and RBOB up 7 at their highest, only to reverse to losses this morning. Equities saw similar moves in reverse overnight as a flight to safety trade soon gave way to a sigh of relief recovery.

Gasoline futures are leading the way lower this morning, adding to the argument that we may have seen the spring peak in prices a week ago, unless some actual disruption pops up in the coming weeks. The longer term up-trend is still intact and sets a near-term target to the downside roughly 9 cents below current values. ULSD meanwhile is just a nickel away from setting new lows for the year, which would open up a technical trap door for prices to slide another 30 cents as we move towards summer.

A Reuters report this morning suggests that the EPA is ready to announce another temporary waiver of smog-prevention rules that will allow E15 sales this summer as political winds continue to prove stronger than any legitimate environmental agenda. RIN prices had stabilized around 45 cents/RIN for D4 and D6 credits this week and are already trading a penny lower following this report.

Delek’s Big Spring refinery reported maintenance on an FCC unit that would require 3 days of work. That facility, along with several others across TX, have had numerous issues ever since the deep freeze events in 2021 and 2024 did widespread damage. Meanwhile, overnight storms across the Midwest caused at least one terminal to be knocked offline in the St. Louis area, but so far no refinery upsets have been reported.

Meanwhile, in Russia: Refiners are apparently installing anti-drone nets to protect their facilities since apparently their sling shots stopped working.

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

Pivotal Week For Price Action
Market TalkThursday, Apr 18 2024

The Sell-Off Continues In Energy Markets, RBOB Gasoline Futures Are Now Down Nearly 13 Cents In The Past Two Days

The sell-off continues in energy markets. RBOB gasoline futures are now down nearly 13 cents in the past two days, and have fallen 16 cents from a week ago, leading to questions about whether or not we’ve seen the seasonal peak in gasoline prices. ULSD futures are also coming under heavy selling pressure, dropping 15 cents so far this week and are trading at their lowest level since January 3rd.

The drop on the weekly chart certainly takes away the upside momentum for gasoline that still favored a run at the $3 mark just a few days ago, but the longer term up-trend that helped propel a 90-cent increase since mid-December is still intact as long as prices stay above the $2.60 mark for the next week. If diesel prices break below $2.50 there’s a strong possibility that we see another 30 cent price drop in the next couple of weeks.

An unwind of long positions after Iran’s attack on Israel was swatted out of the sky without further escalation (so far anyway) and reports that Russia is resuming refinery runs, both seeming to be contributing factors to the sharp pullback in prices.

Along with the uncertainty about where the next attacks may or may not occur, and if they will have any meaningful impact on supply, come no shortage of rumors about potential SPR releases or how OPEC might respond to the crisis. The only thing that’s certain at this point, is that there’s much more spare capacity for both oil production and refining now than there was 2 years ago, which seems to be helping keep a lid on prices despite so much tension.

In addition, for those that remember the chaos in oil markets 50 years ago sparked by similar events in and around Israel, read this note from the NY Times on why things are different this time around.

The DOE’s weekly status report was largely ignored in the midst of the big sell-off Wednesday, with few noteworthy items in the report.

Diesel demand did see a strong recovery from last week’s throwaway figure that proves the vulnerability of the weekly estimates, particularly the week after a holiday, but that did nothing to slow the sell-off in ULSD futures.

Perhaps the biggest next of the week was that the agency made its seasonal changes to nameplate refining capacity as facilities emerged from their spring maintenance.

PADD 2 saw an increase of 36mb/day, and PADD 3 increased by 72mb/day, both of which set new records for regional capacity. PADD 5 meanwhile continued its slow-motion decline, losing another 30mb/day of capacity as California’s war of attrition against the industry continues. It’s worth noting that given the glacial pace of EIA reporting on the topic, we’re unlikely to see the impact of Rodeo’s conversion in the official numbers until next year.

Speaking of which, if you believe the PADD 5 diesel chart below that suggests the region is running out of the fuel, when in fact there’s an excess in most local markets, you haven’t been paying attention. Gasoline inventories on the West Coast however do appear consistent with reality as less refining output and a lack of resupply options both continue to create headaches for suppliers.

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