Energy Complex Moving Higher For 5th Straight Day

Market TalkTuesday, Sep 10 2019
Energy Futures Weaken

The energy complex is moving higher for a 5th straight day, with most futures contracts reaching their highest levels in a month. Optimism for more production cuts thanks to comments from the new Saudi energy minister are getting credit for the early rally for a 2nd straight day.

As prices push through the high-trade levels from August, there is a technical window opening that suggests we could see additional upside for crude and products that should push WTI back north of $60 and ULSD above $2, although as we learned throughout the summer, we’re only one tweet away from concerns over global economic activity raining on an energy parade.

The steady march higher over the past week has provided counter-seasonal strength to gasoline prices across much of the country, as the driving season is now in our rear-view mirror, and the transition to less-stringent winter-grade specifications at the pipeline & terminal levels is underway. A few regional markets – primarily in the Western half of the country - are seeing a squeeze on any remaining summer-grade barrels, while many East Coast markets are seeing the opposite effect as inventories remain ample.

The odds are still low (30% or less) for each of the 3 storm systems moving across the central Atlantic to develop over the next 5 days. The most likely threat is currently known as disturbance 2, and while development is not likely (according to the National Hurricane Center) this week, it could get into the Gulf of Mexico over the weekend, where it’s more likely to strengthen and become a threat to refineries along the Gulf Coast, not to mention Alabama.

The EIA highlighted a study that Drilled by Uncompleted wells don’t seem to fare any worse when they begin to produce than a well that’s drilled and fracked in short order. This study suggests that total US production may continue to climb for months, if not years, thanks to a huge backlog of those DUC wells, even though active drilling rig counts have been declining steadily this year.

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Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures

The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.

The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.

We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.

The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.

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

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day

The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.

There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.

As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.

Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.

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