Energy Futures Are Moving Modestly Lower For A 3rd Trading Session
Energy futures are moving modestly lower for a 3rd trading session (Including last Friday) as indecision from OPEC and concerns of a post-Thanksgiving slowdown in demand combine to keep buyers at bay.
The upward sloping trend lines started when prices bottomed out November 1st (some 30% below current levels) are still intact, and if the bulls can hold on, there’s still a strong technical argument for higher prices in the weeks to come. Peg the $1.20 range for RBOB and $1.35 range for ULSD as must-hold levels for the bulls this week. A break of below those levels suggests we could see a quick 10-15 cents of downside as a correction of the furious November rally.
OPEC & friends were unable to come to an agreement and delayed an official announcement to Tuesday, and then again until Thursday, which seemed to spook the market and encouraged sellers to step back in Monday afternoon. Prior to the meeting it seemed inevitable that the cartel would at least extend its production cuts, but suddenly that “no brainer” option appears easier said than done.
There weren’t any new refinery shutdown notices in the past 24 hours, but there was some more bad news. A multiyear study done on Texans living near oil refineries suggests that cancer risks increase notably. That’s not necessarily a surprise given the volatile organic compounds involved in the refining process but a long term study of this type does add another argument for the anti-fossil fuel movement in addition to the climate change arguments that are becoming more mainstream. Meanwhile, a separate report suggests the EPA and other air-quality-monitoring agencies are under-estimating the pollution caused by refineries.
Similar to what we saw with European contracts in Friday’s report, the CFTC is showing money managers made increases in net length for WTI, RBOB and ULSD last week, jumping on the bandwagon as prices rallied to 8 month highs. WTI saw a mix of new long positions and short covering both contribute to those increases, but open interest remains near a 4 year low, as new competing contracts for oil based in Houston and in a few Asian markets makes the Cushing OK based contract less appealing, and the general enthusiasm for oil around the world continues to be subdued.
An EIA report this morning highlights the impact COVID shutdowns last spring had on the US petroleum trade as the country briefly reverted to a net importer of fuel, after reaching record high export levels in February.
Click here to download a PDF of today’s TACenergy Market Talk.
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Week 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Gasoline and oil prices are attempting to rally for a 2nd straight day, a day ahead of the delayed OPEC meeting, while diesel prices are slipping back into the red following Tuesday’s strong showing.
The API reported gasoline inventories dropped by 898,000 barrels last week, crude inventories declined by 817,000 barrels while distillates saw an increase of 2.8 million barrels. Those inventory stats help explain the early increases for RBOB and WTI while ULSD is trading lower. The DOE’s weekly report is due out at its normal time this morning.
A severe storm on the Black Sea is disrupting roughly 2% of the world’s daily oil output and is getting some credit for the bounce in futures, although early reports suggest that this will be a short-lived event.
Chevron reported that its Richmond CA refinery was back online after a power outage Monday night. San Francisco spot diesel basis values rallied more than a dime Tuesday after a big drop on Monday following the news of that refinery being knocked offline.
Just a few days after Scotland’s only refinery announced it would close in 2025, Exxon touted its newest refinery expansion project in the UK Tuesday, with a video detailing how it was ramping up diesel production to reduce imports and possibly allow for SAF production down the road at its Fawley facility.
Ethanol prices continue to slump this week, reaching a 2-year low despite the bounce in gasoline prices as corn values dropped to a 3-year low, and the White House appears to be delaying efforts to shift to E15 in an election year.
Click here to download a PDF of today's TACenergy Market Talk.
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.