Energy Futures Are Green Across The Board This Morning

Market TalkTuesday, Aug 16 2022
Pivotal Week For Price Action

Energy futures are green across the board this morning after yesterday’s selloff had the prompt month RBOB contract break below the $3 level. WTI crude oil futures likewise dropped below $90 per barrel in Monday’s trading session. The September heating oil contract is pulling the complex higher today, trading up 1.2% over yesterday’s settlement while gasoline and crude oil drift marginally higher this morning.

While outwardly bullish on the future of oil prices, Saudi Aramco (the world’s largest energy company) divested much of the profit it made in the first half of the year in alternative forms of energy including wind, solar, and hydrogen. Of course when you make $48 billion in profit in Q2 alone, whose to say a few bucks shouldn’t go to green energy, which seems to be the popular play on Wall Street ever since US lawmakers passed its most recent climate bill.

The National Hurricane Center is now tracking a new system forming off the east coast of Nicaragua, which it gives a 20% chance of cyclonic organization in the next five days. The NOAA’s current projection has the storm hopping over the Yucatan peninsula and into the Gulf of Mexico by next week, where it could threaten energy infrastructure if it makes landfall as anything more than a rainmaker.

New York gasoline prices are trading nearly 50 cents higher than their Gulf Coast counterparts this week. Low regional inventory levels, lack international imports, and previous refinery closures are the cited reasons for the current market condition, which has pushed premiums for shipping gasoline on the Colonial pipeline through the roof over the past 30 days. Shippers looking to send gasoline from Houston to New York paid 19 cents over the interstate pipeline’s tariff to do so last week.  

Short sellers’ profit-taking looks to be the reason for this morning’s buying action however traders seem to be taking a relatively bullish stance on diesel prices. The ongoing war in Ukraine and it’s effect on international distillate inventory levels paints a grim picture for this winter, when much of Europe will use the fuel to heat their homes. In combination with the backwardated futures market disincentivizing traders from holding addition inventory, some expect this winter’s diesel stockpiles to reach critically low levels.

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

Market Talk Update 08.16.22

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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.