Energy And Equity Markets Are Both Seeing Losses To Start The Week

Market TalkMonday, Sep 19 2022
Pivotal Week For Price Action

Energy and equity markets are both seeing losses to start the week as fears of a global economic slowdown seem to be weighing heavily on markets around the world. Refined products are trading near multi-month lows, and threatening a technical breakdown that could see another big price slide unless buyers step in soon.  

The US dollar is rallying this morning, approaching the 20-year high it set earlier in the month ahead of several central bank meetings this week, which is putting downward pressure on several commodities. According to the CME’s Fedwatch tool, traders are giving 80% odds the US FED will announce a 75 point rate increase this week, and a 20% chance of a 100 point hike. Those bets have changed dramatically over the past week, and the past month, as inflation reports came in worse than many expected, convincing some traders that the only way to stop inflation is to induce a recession

Hurricane Fiona is expected to become a major storm later this week, after running over Puerto Rico and the Dominican Republic. The storm only appears to be targeting defunct refineries having passed near the bankrupt Limetree Bay FKA Hovensa refinery this weekend, and now taking aim at the Come by Chance facility in Newfoundland that is attempting to convert to renewables production, and already facing serious challenges in doing so. 

Money managers continue to act cautiously towards energy contracts, with open interest holding near 5-7 year lows. The large speculative category of traders made small increases in crude oil net length last week, but cut their length in refined products, keeping their total holdings well below the average levels we’ve seen over the past 5 years. 

Baker Hughes reported an increase of 8 oil rigs active in the US last week, snapping a 2 week decline that lowered the US total by 14. Natural gas rigs dropped by 4, wiping out last week’s gain. A WSJ article this morning highlights private drillers nearing their capacity, which helps explain some of why the rig counts seem to have plateaued recently.

The DOE’s leader met with the governors from North Eastern US states last week to discuss concerns over shortages of refined fuel and LNG supply ahead of the winter heating season.  Options on the table appear to be a release of the regional gasoline and heating oil reserves, or waivers on the Jones Act. The energy secretary acknowledged “concern about the low levels of privately held refined product inventories in New England” but did not make any proposals yet on how to deal with the situation.  

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

Market Talk Update 09.19.2022

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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.