Diesel Prices Have Rallied More Than 10 Cents/Gallon After Approaching 6 Month Lows Thursday

Market TalkFriday, Sep 16 2022
Pivotal Week For Price Action

Diesel prices have rallied more than 10 cents/gallon after approaching 6 month lows Thursday, despite a warning from a shipping bellwether that a global economic slowdown is upon us that has stock markets sliding lower once again. 

From a chart perspective, the price action in the back half of September looks to be pivotal as we’ve reached “rally or else” territory with a slide below $3 for diesel and $2 for gasoline looking possible this winter if support doesn’t hold.

Yesterday’s reports of a tentative deal to avert a rail strike had products from ethanol and biodiesel to natural gas all pulling back sharply after rallying earlier in the week. The market is certainly behaving as if the unions will vote to formally accept this deal, even though there’s still a risk it could be rejected. Read here for a reminder on why supply chain challenges will continue even if this deal is done. 

Germany announced it would be taking over 3 Russian owned refineries in the latest move in the energy chess match. The announcement removes one of the major hurdles to Germany backing a ban on Russian crude imports, with the big question being whether or not they’ve found a replacement supply source to keep those facilities operating.

West Coast gasoline prices are continuing to cool after a huge spike to start September, but LA distillates staged a 10 cent rally of their own Thursday, largely offsetting the big move lower in futures. Diesel inventories in the region appear to be ample, yet the buying extended into October, suggesting the diesel rally may be more than a simple short squeeze as September shipping schedules come to an end.

Tropical Storm Fiona continues to look like a non-issue for energy supplies, and most models keep it off shore of the US East Coast after it passes Puerto Rico and the Dominican this weekend, but the latest track does shift slightly to the West which keeps the possibility of a hit on the eastern side of Florida open. There are two other storms being tracked by the NHC today, but neither one looks like it will be a threat to the US even if they overcome their low odds of developing in the next 5 days.

The great oil traders: Today’s interesting read on why the US government may soon be buying oil at $80 instead of $24.

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

Market Talk Update 09.16.2022

News & Views

View All
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.