Diesel Futures Try To Lead The Energy Complex Higher

Market TalkMonday, Apr 12 2021
Pivotal Week For Price Action

Diesel futures are trying to lead the energy complex higher to start the week, testing the upper end of their sideways trading range, after chart support held up to several attempted sell-offs last week. There’s little in the way of news to drive the action so far, and it seems that we’re still stuck in the back and forth pattern until the range breaks.  

While gasoline and diesel prices continue to move sideways, ethanol prices are holding at multi-year highs north of $2/gallon in most U.S. markets, thanks to elevated corn prices and RIN Values holding near all-time highs. Several ethanol producers that shut down operations when prices were in the $.70-$.80 cent range this time last year are coming back online to take advantage of these lofty prices, which will only increase pressure on feedstock producers to supply the parade of new renewable diesel projects racing to take advantage of the subsidies provided to turn food into fuel.

Baker Hughes reported no change in the total U.S. count of active oil rigs last week. The Eagle Ford basin in TX did increase its count by one rig, while the “other” category made up of smaller basins declined by one. A Rystad energy report released Friday suggested that fracking activities across the U.S. are approaching pre-pandemic levels, and that output should continue to increase in the second quarter, which is not surprising given current prices. What is more surprising is that flaring from those wells is down substantially as producers are beginning to catch up with the infrastructure needed to deal with the excess natural gas produced in those operations. 

Money managers continue to display mixed feelings for energy contracts, which isn’t too hard to understand given the yo-yo price action we’ve seen in recent weeks. The large speculative category of trader decreased their net long position in WTI, Brent and Gasoil last week by relatively small amounts, but added to their bets on higher priced for RBOB and ULSD. 

Houthi rebels launched more attacks on Saud Arabia overnight, this time targeting an area with several refineries. It’s not immediately clear what if any damage was done to those facilities, but given the limited impact of several recent attacks, the market does not appear too concerned.

Today’s interesting read: Why closing a nuclear power plant in New York will increase natural gas consumption, and may cause more diesel demand spikes when electricity demand peaks.

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

TACenergy MarketTalk 041221

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Pivotal Week For Price Action
Market TalkThursday, Mar 28 2024

Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

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, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

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