Diesel Is Winning The Price Tug Of War So Far This Week

Market TalkWednesday, Aug 24 2022
Pivotal Week For Price Action

Diesel is winning the price tug of war so far this week, rallying 75 cents from the lows set August 8th while gasoline prices continue to stumble pushing the premium for ULSD vs RBOB to 98 cents/gallon this morning.

New York harbor spot gasoline prices have been leading the slide lower, completing their return trip to reality after starting August trading 50 cents above futures and 70 cents above some regional counterparts. That easing can also be seen in the September/October (U/V) RBOB spread which has plummeted as resupplies by pipe, boat and truck raced to take advantage of the huge arbitrage opportunity before the transition to winter grade fuels starts next month.

The forward curve charts below demonstrate the changing opinions in the market over the past month. Crude oil and gasoline prices are lower than a month ago at the front of the curve, suggesting that fears of supply shortages have eased, while prices further forward have been increasing, which suggests that the fears of a recession have been declining as well. Diesel is the exception to that trend, with prices across the curve up from month ago and week ago levels, as solutions to the shortage of distillates (in some parts aided by the shortage in natural gas) are few and far between and whatever economic slowdown is expected isn’t big enough at this point to push diesel prices lower.

Two more potential storm threats are being tracked by the NHC, although both are given low 20% odds of developing. We’re in the Cabo Verde portion of the Hurricane season now, so we can expect new potential systems every few days for the next 3-4 weeks, and will just have to wait and see which become major hurricanes.   

Today’s interesting read from Rystad Energy: Why Russian oil production has bounced back this summer, and why it will drop again this fall. 

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

Market Talk Update 08.24.2022

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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.