Energy Futures Are Moving Higher And Attempting To Break Out Of The Rounding Top Pattern
Energy futures are moving higher for a 3rd straight session, and attempting to break out of the rounding top pattern that continues to suggest lower prices are coming in the weeks ahead. The $2.40 range for gasoline and $2.50 for ULSD still look like good resistance ranges that could mean the difference between another run at multi year highs before year end, and the bearish pattern formation that could push prices much lower in December.
Oil prices are lagging behind refined products this morning, which may be partially caused by rumors that the White House may order the release of some Strategic Petroleum Reserves to combat soaring prices. Read here if you’re wondering whether or not that’s a bad idea. To summarize, an SPR release “…is rather like tapping into your retirement fund to pay for a vacation.”
Meanwhile P66 announced that its Belle Chasse refinery, one of the refineries that may have been able to actually buy crude oil from the SPR and turn it into the products consumers actually can use, would be converted into a terminal facility after the company decided the repairs needed after Hurricane Ida weren’t worth the investment.
Ethanol prices are holding in the stratosphere for now with NYH spots still north of $4/gallon, while others are trading north of $3.30. There’s more than $1/gallon of backwardation in the market over the next 30 days as US ethanol production is holding at all-time highs, so look out below once those prices start to head lower. RIN prices have continued their decline this week, as the industry continues to wait impatiently for the long overdue RFS volumes. An ethanol lobbying group is suing the EPA over these delays, while simultaneously celebrating the EPA’s rejection of the first small refinery waiver exemption its ruled on under the new administration.
The inventory data deluge for November starts today. We’ll see the EIA’s monthly short term energy outlook later this morning, then the API inventories this afternoon. The DOE’s weekly report is out tomorrow, then OPEC’s monthly report on Thursday.
There are just 3 weeks left in the Atlantic Hurricane season for 2021. No storms are currently being tracked by the NHC, extending this period of calm after all the storm names were used up in the initial list during a busy season.
Click here to download a PDF of today's TACenergy Market Talk.
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Energy Markets Rally Again Thursday After A Choppy Wednesday Session
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Energy Markets Rally Again Thursday After A Choppy Wednesday Session
Energy markets are trying to rally again Thursday after a choppy Wednesday session. RBOB gasoline futures are leading the push higher, on pace for a 3rd consecutive day of gains after finding a temporary floor Tuesday and have added 12 cents from those lows.
Equity markets are pointing sharply lower after a weak Q1 GDP estimate which seems to have contributed to a pullback in product prices over the past few minutes, but don’t be surprised if the “bad news is good news” low interest rate junkies start jumping in later on.
The DOE’s weekly report showed sluggish demand for gasoline and diesel, but inventory levels in most markets continue to follow their typical seasonal trends. Refinery runs held fairly steady last week with crude inputs down slightly but total gross throughputs up slightly as most facilities are now back online from a busy spring maintenance season and geared up for peak demand this summer.
Propane and propylene exports spiked to a record high north of 2.3 million barrels/day last week, which demonstrates both the US’s growing influence on global product markets, and the steady shift towards “other” products besides traditional gasoline and diesel in the level of importance for refiners.
The EIA acknowledged this morning that its weak diesel consumption estimates reflected the switch to Renewable Diesel on the West Coast, although they did not provide any timeline for when that data will be included in the weekly survey. The agency acknowledged that more than 4% of the total US consumption is now a combination of RD and Biodiesel, and that number is expected to continue to grow this year. This morning’s note also suggested that weak manufacturing activity was to blame for the sluggish diesel demand across the US, while other reports suggest the freight recession continued through Q1 of this year, which is also contributing to the big shift from tight diesel markets to oversupplied in several regions.
Valero kicked off the Q1 earnings releases for refiners with solid net income of $1.2 billion that’s a far cry from the spectacular earnings north of $3 billion in the first quarter of 2023. The refining sector made $1.7 billion, down from $4.1 billion last year. That is a pattern that should be expected from other refiners as well as the industry returns to a more normal market after 2 unbelievable years. You wouldn’t guess it by looking at stock prices for refiners though, as they continue to trade near record highs despite the more modest earnings.
Another pattern we’re likely to see continue with other refiners is that Renewable earnings were down, despite a big increase in production as lower subsidies like RINs and LCFS credit values sting producers that rely on those to compete with traditional products. Valero’s SAF conversion project at its Diamond Green joint venture is progressing ahead of schedule and will give the company optionality to flip between RD and SAF depending on how the economics of those two products shakes out this year. Valero also shows part of why refiners continue to disappear in California, with operating expenses for its West Coast segment nearly 2X that of the other regions it operates in.
Week 16 - US DOE Inventory Recap
Energy Markets Trading Quietly In The Red As Ethanol Prices Rally To Five-Month High
Energy markets are trading quietly in the red to start Wednesday’s session after a healthy bounce Tuesday afternoon suggested the Israel-Iran-linked liquidation had finally run its course.
There are reports of more Ukrainian strikes on Russian energy assets overnight, but the sources are sketchy so far, and the market doesn’t seem to be reacting as if this is legitimate news.
Ethanol prices have rallied to a 5-month high this week as corn and other grain prices have rallied after the latest crop progress update highlighted risks to farmers this year, lower grain export expectations from Ukraine, and the approval of E15 blends this summer despite the fact it pollutes more. The rally in grain and renewables prices has also helped RIN values find a bid after it looked like they were about to test their 4-year lows last week.
The API reported small changes in refined product inventories last week, with gasoline stocks down about 600,000, while distillates were up 724,000. Crude oil inventories increased by 3.2 million barrels according to the industry-group estimates. The DOE’s weekly report is due out at its normal time this morning.
Total reported another upset at its Port Arthur refinery that’s been a frequent flier on the TCEQ alerts since the January deep freeze knocked it offline and damaged multiple operating units. This latest upset seems minor as the un-named unit impacted was returned to normal operations in under an hour. Gulf Coast basis markets have shrugged off most reports of refinery upsets this year as the region remains well supplied, and it’s unlikely we’ll see any impact from this news.
California conversely reacted in a big way to reports of an upset at Chevron’s El Segundo refinery outside of LA, with CARBOB basis values jumping by more than a dime. Energy News Today continued to show its value by reporting the upset before the flaring notice was even reported to area regulators, proving once again it’s ahead of the curve on refinery-related events. Another industry news outlet meanwhile struggled just to remember where the country’s largest diesel seller is located.
Click here to download a PDF of today's TACenergy Market Talk