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 TalkThursday, Feb 29 2024

It's Another Mixed Start For Energy Futures This Morning After Refined Products Saw Some Heavy Selling Wednesday

It's another mixed start for energy futures this morning after refined products saw some heavy selling Wednesday. Both gasoline and diesel prices dropped 7.5-8.5 cents yesterday despite a rather mundane inventory report. The larger-than-expected build in crude oil inventories (+4.2 million barrels) was the only headline value of note, netting WTI futures a paltry 6-cent per barrel gain on the day.

The energy markets seem to be holding their breath for this morning’s release of the Personal Consumption Expenditures (PCE) data from the Bureau of Economic Analysis (BEA). The price index is the Fed’s preferred inflation monitor and has the potential to impact how the central bank moves forward with interest rates.

Nationwide refinery runs are still below their 5-year average with utilization across all PADDs well below 90%. While PADD 3 production crossed its 5-year average, it’s important to note that measure includes the “Snovid” shutdown of 2021 and throughput is still below the previous two years with utilization at 81%.

We will have to wait until next week to see if the FCC and SRU shutdowns at Flint Hills’ Corpus Christi refinery will have a material impact on the regions refining totals. Detail on the filing can be found on the Texas Commission on Environmental Quality website.

Update: the PCE data shows a decrease in US inflation to 2.4%, increasing the likelihood of a rate cut later this year. Energy futures continue drifting, unfazed.

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, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

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