Energy Complex Under Pressure

Market TalkThursday, Mar 18 2021
Pivotal Week For Price Action

Under pressure: The energy complex is facing another wave of selling for a fourth straight day, and the trend-lines that have held up prices for 4.5 months are finally facing a real test. If that support holds, this week’s sell-off may soon be forgotten, but a break down here sets up another 20-30 cents of downside potential for refined products as they correct one of the largest rallies in history.

RBOB futures did trade higher through most of the night, thanks at least in part to reports of a gasoline spill that forced the buckeye pipeline to close one of its lines that feeds the NY harbor area. The line that’s closed primarily delivers to Long Island, and so far it doesn’t seem to be impacting flows around the NYH trading hub, so that impact should be minimal unless the damage is found to be more widespread. Separate reports that one of the last standing refineries on the East Coast was forced to shut several units for unplanned repairs also helped give gasoline prices a boost overnight, but those gains have not lasted, and RBOB futures are now trading nearly 14 cents below the highs set Sunday night.

According to the DOE’s weekly status report there is still roughly 1.5 million barrels/day of refining capacity in the Gulf Coast offline from where run rates were prior to the Polar Plunge in February. The recovery from that event is now taking longer than what we’ve seen in even the most severe hurricanes of the past 20 years, as the impacts were much more widespread, and most plants did not start shutting down operations ahead of the storm, meaning more damage was likely when they were knocked offline. There are also reports that some plants decided to move up maintenance since the facilities were down anyway, which is probably contributing to the slow recovery. While PADD 3 runs still have plenty of room to recover,  PADD 2 run rates have already reached pre-storm levels and PADD 1 refiners have increased rates to Pre-COVID levels, taking advantage of the better margin environment. West Coast (PADD 5) runs are holding steady, while PADD 4 runs remain not much more than a rounding error.

If you’re reading this, you’re probably not using Microsoft Office 365, which published a root cause analysis of the major outage that affected Outlook & Teams and (even worse for the Gen Z crowd) Xbox live nationwide. If it doesn’t make sense how they can publish a root cause analysis on a problem that as of this morning hasn’t been solved, you’re not alone, but don’t worry they’ll keep telling us it’s fixed. In the meantime, if you’re missing a quote or another regular email, please verify with old school methods like texting or tweeting.

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

TACenergy MarketTalk 031821

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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.