Drawdown Across Board In Energy Stockpiles

Market TalkThursday, Jun 20 2019
Heavy Selling In Energy Futures

A drawdown across the board in energy stockpiles as published by the Energy Information Administration, which came as a surprise to traders, took credit for the modest buying seen yesterday in refined products. Although crude oil posted a net decrease in national inventories, the build at Cushing, the delivery point for the WTI futures contract, actually added barrels last week, keeping the crude benchmark in the red for the day. Gas and diesel both posted gains on Wednesday with stocks moving lower by 1.7 million barrels and .6 million barrels respectively.

Lower crude oil prices seem to be weighing on producers as national crude output was down for a second week in a row for the first time since April. Whether or not increased military activity by Iran, the latest of which resulted in a downed US drone, will boost oil prices to the extent that seems to be their motive is yet to be seen. The aerial property damage is only the latest installment of the DC vs Tehran saga with previous episodes touching on increased US troop presence in the area, apparent sabotage of crude oil tankers, and Iran speeding up the production of nuclear materials.

The increased international tensions seems to be working today however, sending bout American and European crude prices higher by almost $2 per barrel. Refined product futures seem to be following the upward move with gas prices adding +$.03 per gallon and diesel rallying almost 4.5 cents.

Refinery runs in PADD 2 stole the show yesterday and toted a 10% bump in production rates last week. This latest bump out of a waterlogged Midwest boosted throughput to a seasonal 5-year high amid regional flood warnings that seem almost commonplace as of late. Furthermore, Ethanol stocks have seen their 5th consecutive weekly decline, as the entire farming industry struggles with the abnormally wet summer.

Crude and diesel futures have broken through their respective 20-day moving averages this morning, a technically significant resistance level that hasn’t been touched since late May. For both contracts, higher prices could be expected should prices settle above said level after today’s trading.

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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.