Diesel Prices Continue To Lead The Energy Complex On A Recovery Rally
Diesel prices continue to lead the energy complex on a recovery rally, adding more than 26 cents/gallon since Friday, and dragging gasoline prices up more than 10 cents after hitting a new 2022 low early in Monday’s session.
Cold weather in Europe and a big winter storm in the US are getting some of the credit for the recovery rally in diesel prices, as European nations continue to disagree on a price-cap plan for Russian natural gas, and the region gets its first big test of the electric grid since the start of the war.
China’s COVID reopening continues to be a wild card for energy markets, as some see a spike in oil and products demand looming that could send prices sharply higher, while others see another round of outbreaks shutting down the new plan to ease restrictions.
The CPI reading for November sent equity futures sharply higher after its release at 7:30am (and pulled refined products up another 2-3 cents) as the inflation gauge came in below many forecasts, which gives the free money crowd a reason to beg the FED to stop raising rates. The FOMC’s next announcement is scheduled tomorrow with the CME’s fedwatch tool showing a 100% probability of at least another 50 point rate hike, while 23% of the market is betting on a 75 point increase, down from 26% prior to the CPI announcement.
The Keystone pipeline remains shut as repair crews work to determine the cause of last week’s leak, and recover the oil spilled. Markets continue to shrug off the news as apparently traders expect the line to come back soon, and alternative options to be sufficient in the meantime.
OPEC’s monthly oil market report for December is due out later this morning.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllWeek 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.