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.
News & Views
View All
Energy Futures Are Caught Up In Headline Tug-O-War This Morning
Energy futures are caught up in headline tug-o-war this morning with Canadian oil production concerns and a positive US GDP report trying to push prices higher while sinking Chinese demand worries and Gaza ceasefire hopes are applying downward pressure. The latter two seem to be favored more so far this morning with WTI and Brent crude oil futures down ~45 cents per barrel, while gasoline and diesel prices are down about half a cent and two cents, respectively.
No news is good news? Chicago gasoline prices dropped nearly 30 cents yesterday, despite there not being any update on Exxon’s Joliet refinery after further damage was discovered Wednesday. Its tough to say if traders have realized the supply situation isn’t as bad as originally thought or if this historically volatile market is just being itself (aka ‘Chicago being Chicago’).
The rain isn’t letting up along the Texas Gulf Coast today and is forecasted to carry on through the weekend. While much of the greater Houston area is under flood watch, only two refineries are within the (more serious) flood warning area: Marathon’s Galveston Bay and Valero’s Texas City refineries. However, notification that more work is needed at Phillip’s 66 Borger refinery (up in the panhandle) is the only filing we’ve seen come through the TECQ, so far.
Premiums over the tariff on Colonial’s Line 1 (aka linespace value) returned to zero yesterday, and actually traded in the negatives, after its extended run of positive values atypical of this time of year. Line 1’s counterpart, Line 2, which carries distillates from Houston to Greensboro NC, has traded at a discount so far this year, due to the healthy, if not over-, supply of diesel along the eastern seaboard.
Click here to download a PDF of today's TACenergy Market Talk.
WTI And Brent Crude Oil Futures Are Trading ~$1.50 Per Barrel Lower In Pre-Market Trading
The across-the-board drawdown in national energy stockpiles, as reported by the Department of Energy yesterday, stoked bullish sentiment Wednesday and prompt month gasoline, diesel, and crude oil futures published gains on the day. Those gains are being given back this morning.
The surprise rate cut by the People’s Bank of China is being blamed for the selling we are seeing in energy markets this morning. While the interest rate drop in both short- and medium-term loans won’t likely affect energy prices outright, the concern lies in the overall economic health of the world’s second largest economy and crude oil consumer. Prompt month WTI and Brent crude oil futures are trading ~$1.50 per barrel lower in pre-market trading, gasoline and diesel are following suit, shaving off .0400-.0450 per gallon.
Chicagoland RBOB has maintained its 60-cent premium over New York prices through this morning and shows no sign of coming down any time soon. Quite the opposite in fact: the storm damage, which knocked Exxon Mobil’s Joliet refinery offline on 7/15, seems to be more extensive than initially thought, potentially extending the repair time and pushing back the expected return date.
There are three main refineries that feed the Chicago market, the impact from one of them shutting down abruptly can be seen in the charts derived from aforementioned data published by the DOE. Refinery throughput in PADD 2 dropped 183,000 barrels per day, driving gasoline stockpiles in the area down to a new 5-year seasonal low.
While it seems all is quiet on the Atlantic front (for now), America’s Refineryland is forecasted to receive non-stop rain and thunderstorms for the next four days. While it may not be as dramatic as a hurricane, flooding and power outages can shut down refineries, and cities for that matter, all the same, as we learned from Beryl.