Disappearing Rallies Are Becoming A Theme In The Energy Arena

Market TalkThursday, Dec 2 2021
Pivotal Week For Price Action

Disappearing rallies are becoming a theme in the energy arena this week as Wednesday’s action saw 10 cent overnight gains erased throughout the day, and already Thursday we’ve seen nickel gains overnight turn into 3 cent losses early going. The smack downs of any attempted bounce are adding to the bearish sentiment on the charts, and leaving the complex at risk of another sharp selloff in the back half of the week. 

There is no doubt that fear is taking hold of both equity and energy markets, with volatility indices soaring to 1 year highs, and each mention of a new Omicron case seeming to have an immediately negative impact on prices, particularly now that the FED seems to be changing its stance, and viewing the virus as an inflation risk, not a reason to create more inflation themselves as they’ve done the past 2 years.

The best hope for a recovery rally that’s able to last more than a few hours may come from the OPEC & Friends meeting this morning, if the cartel agrees to pause or reverse its output increases due to the Omicron outbreak and its expected impact on global fuel demand. Then again, the guesses that the cartel may change course today have been increasing all week and yet prices continue to fall. 

The DOE’s weekly report was largely shrugged off and overshadowed by the Omicron in the US story Wednesday, but there are some bearish fundamentals that won’t help encourage buyers to step in and buy the dip.  US Crude oil production reached an 18 month high, even though there’s still a quarter million gallons per day of production offline from Hurricane Ida, and numerous bottlenecks in the supply chain slowing the rate of drilling. As those two issues are worked through in 2022, it’s likely we will see US output jump north of 12 million barrels/day at a time when the world doesn’t seem to need more supply.

Speaking of which, the report also showed a large pullback in US fuel demand, particularly in gasoline, and with the holiday hangover not yet in the numbers, we could see another big drop in consumption in the weeks to come.

While the meltdown in futures is getting most of the attention this week, prices in the Pacific Northwest have been resisting the trend with basis values jumping sharply higher as at least 3 refineries in the region are still having to reduce run rates due to a lack of crude oil supply caused by last month’s flooding. The good news for suppliers in the region is that Transmountain pipeline is still on track to restart next week which should bring relief to those plants in short order.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Market Talk Update 12.02.21

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Pivotal Week For Price Action
Market TalkWednesday, Jun 7 2023

Energy Prices Fluctuate: Chinese Imports Surge, Saudi Arabia Cuts Output and Buys Golf

Energy prices continue their back-and-forth trading, starting Wednesday’s session with modest gains, after a round of selling Tuesday wiped out the Saudi output cut bounce. 

A surge in China’s imports of crude oil and natural gas seem to be the catalyst for the early move higher, even though weak export activity from the world’s largest fuel buyer suggests the global economy is still struggling. 

New tactic?  Saudi Arabia’s plan to voluntarily cut oil production by another 1 million barrels/day failed to sustain a rally in oil prices to start the week, so they bought the PGA tour

The EIA’s monthly Short Term Energy Outlook raised its price forecast for oil, citing the Saudi cuts, and OPEC’s commitment to extend current production restrictions through 2024. The increase in prices comes despite reducing the forecast for US fuel consumption, as GDP growth projections continue to decline from previous estimates. 

The report included a special article on diesel consumption, and its changing relationship with economic activity that does a good job of explaining why diesel prices are $2/gallon cheaper today than they were a year ago.   

The API reported healthy builds in refined product inventories last week, with distillates up 4.5 million barrels while gasoline stocks were up 2.4 million barrels in the wake of Memorial Day. Crude inventories declined by 1.7 million barrels on the week. The DOE’s weekly report is due out at its normal time this morning. 

We’re still waiting on the EPA’s final ruling on the Renewable Fuel Standard for the next few years, which is due a week from today, but another Reuters article suggests that eRINs will not be included in this round of making up the rules.

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

Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkTuesday, Jun 6 2023

Energy Prices Retreat, Global Demand Concerns Loom

So much for that rally. Energy prices have given back all of the gains made following Saudi Arabia’s announcement that it would voluntarily withhold another 1 million barrels/day of oil production starting in July. The pullback appears to be rooted in the ongoing concerns over global demand after a soft PMI report for May while markets start to focus on what the FED will do at its FOMC meeting next week.

The lack of follow through to the upside leaves petroleum futures stuck in neutral technical territory, and since the top end of the recent trading range didn’t break, it seems likely we could see another test of the lower end of the range in the near future.  

RIN prices have dropped sharply in the past few sessions, with traders apparently not waiting on the EPA’s final RFS ruling – due in a week – to liquidate positions. D6 values dropped to their lowest levels in a year Monday, while D4 values hit a 15-month low. In unrelated news, the DOE’s attempt to turn seaweed into biofuels has run into a whale problem.  

Valero reported a process leak at its Three Rivers TX refinery that lasted a fully 24 hours.  That’s the latest in a string of upsets for south Texas refineries over the past month that have kept supplies from San Antonio, Austin and DFW tighter than normal. Citgo Corpus Christi also reported an upset over the weekend at a sulfur recovery unit. Several Corpus facilities have been reporting issues since widespread power outages knocked all of the local plants offline last month.  


Meanwhile, the Marathon Galveston Bay (FKA Texas City) refinery had another issue over the weekend as an oil movement line was found to be leaking underground but does not appear to have impacted refining operations at the facility. Gulf Coast traders don’t seem concerned by any of the latest refinery issues, with basis values holding steady to start the week.

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