Energy Continue Lower on Lower Chinese Imports, Saudi Oil Stockpile

Market TalkTuesday, Jun 20 2023
Pivotal Week For Price Action

Energy futures are giving back a big portion of the strong gains they saw last week as economic uncertainties continue to send mixed signals to financial markets. Meanwhile, severe weather has caused numerous local disruptions over the past week and is sparking concerns about more widespread issues as hurricane season is ramping up ahead of schedule.    

Reminder that due to the holiday, the price changes you’re seeing today are relative to Friday’s levels, not in addition to the losses made in the abbreviated futures trading session Monday.

Last week strong Chinese refinery runs were often cited for the move higher in fuel prices, but this week a drop off in Chinese fuel oil imports is getting blamed for some of the pullback as the economic recovery of 1.3 billion people getting out of lockdown seems to have hit a speed bump

So that’s why they’re cutting output? Reports that Saudi Arabia is sitting on more than 20 million barrels of oil in floating storage aren’t helping encourage buyers to step in so far this week, particularly since the market structure isn’t encouraging storage plays, and may instead be signaling a lack of buyers. 

Tropical Storm Bret was named Monday and is expected to strengthen to a hurricane by tomorrow.  The forecasts are widely varied for this unusual June storm, with most models suggesting the storm will either continue West and hit Central America, or hook north and head out to sea, although a few models do give an outside chance of a threat to Florida or further north along the East Coast so we can’t ignore it completely.  Right behind Bret, another storm system is given 80% odds of development this morning, although early forecasts have it heading north and staying offshore for now.

While forecast tracks suggest low odds that either tropical system makes landfall in the US, large parts of the country are still facing severe weather threats and flooding rains from inland storms. So far there have been several power outages reported at refineries over the past week stretching from the TX panhandle to the Delek facility in Tyler TX, and Calumet’s refinery in Shreveport along with several East Texas terminals reporting short term power and fuel outages.

Tulsa Oklahoma declared a state of emergency after storms knocked out power to hundreds of thousands of homes and businesses, and disrupted terminal activities at 2 local product racks. The HF Sinclair refinery is also reported to be without power, which is sparking concerns of localized fuel shortages if the lights aren’t turned back on soon. The Tulsa area also holds key break-out tankage for the Explorer and Magellan pipelines that bring products from the Gulf Coast to the Midwest, and while no operational upsets have yet been reported at the pipeline facilities, it seems unlikely they escaped the storms unscathed given their close proximity to the other issues.

So far, the larger refineries along the coast that make up the heart of US fuel production have not yet been impacted, and the storms are largely staying north and east of those facilities, although New Orleans-area plants are very close to a round of heavy thunderstorms and could still see some weather-related disruptions this week.

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

Market Talk Update 06.20.2023

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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