Energy Futures Are Selling Off Tuesday

Market TalkTuesday, May 11 2021
Pivotal Week For Price Action

Energy futures are selling off Tuesday, pulling back from the multi-year highs set Sunday night in the wake of the Colonial shutdown chaos. Signs that the pipeline closure will likely be resolved later this week and a pullback in global equity markets both seem to be contributing to the selling, but don’t expect product prices to decline too much until more definitive proof of the pipeline restart is given.

Colonial said late Monday night that one of its smaller lines had restarted using manual operations, and that it continued to execute a plan that should allow most operations to resume by the end of the week. The statement also detailed that the scheduling systems shippers rely on  

Read the official Colonial media statements here:

Ripple effects of the Colonial shutdown:

Several Gulf Coast refiners were reported to cut back their run rates Monday to avoid containment issues since their main outlet is closed. Others were scrambling for ships to offload products, and seeking waivers to the Jones Act to bring that product to the East Coast. 

Explorer pipeline froze nominations on its line as shippers scrambled to use that Gulf Coast-Midwest outlet as a plan B for their excess production.

RIN values spiked (again) in early trading as expectations for a surge in imported products (which require RINs be purchased to comply with the RFS) but pulled back later in the day following Colonial’s report that it should be operating again by the weekend. There’s a rounding top pattern potentially forming on the Corn charts that could end up popping the RIN bubble if those prices make a return to normal levels.

What’s next? Suddenly the country seems to view pipeline capacity in a whole new light, which could put pressure on the administration to re-think its ant-pipeline stance. The spike in RINs could also have some calling for an emergency waiver to the RFS, as the reality sets in that alternative energy sources aren’t yet a viable alternative.

The hackers seem to realize (or are pretending) they’ve bitten off more than they can chew, stating that they didn’t intend to create problems for society, they just wanted to hold people’s data hostage. How noble. Several US government agencies have pinned the blame on the DarkSide group, and said the attack originated in Russia but also said there’s no evidence of Russian government involvement

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Market Update 5-11-21

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Pivotal Week For Price Action
Market TalkWednesday, Jun 7 2023

Energy Prices Fluctuate: Chinese Imports Surge, Saudi Arabia Cuts Output and Buys Golf

Energy prices continue their back-and-forth trading, starting Wednesday’s session with modest gains, after a round of selling Tuesday wiped out the Saudi output cut bounce. 

A surge in China’s imports of crude oil and natural gas seem to be the catalyst for the early move higher, even though weak export activity from the world’s largest fuel buyer suggests the global economy is still struggling. 

New tactic?  Saudi Arabia’s plan to voluntarily cut oil production by another 1 million barrels/day failed to sustain a rally in oil prices to start the week, so they bought the PGA tour

The EIA’s monthly Short Term Energy Outlook raised its price forecast for oil, citing the Saudi cuts, and OPEC’s commitment to extend current production restrictions through 2024. The increase in prices comes despite reducing the forecast for US fuel consumption, as GDP growth projections continue to decline from previous estimates. 

The report included a special article on diesel consumption, and its changing relationship with economic activity that does a good job of explaining why diesel prices are $2/gallon cheaper today than they were a year ago.   

The API reported healthy builds in refined product inventories last week, with distillates up 4.5 million barrels while gasoline stocks were up 2.4 million barrels in the wake of Memorial Day. Crude inventories declined by 1.7 million barrels on the week. The DOE’s weekly report is due out at its normal time this morning. 

We’re still waiting on the EPA’s final ruling on the Renewable Fuel Standard for the next few years, which is due a week from today, but another Reuters article suggests that eRINs will not be included in this round of making up the rules.

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Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkTuesday, Jun 6 2023

Energy Prices Retreat, Global Demand Concerns Loom

So much for that rally. Energy prices have given back all of the gains made following Saudi Arabia’s announcement that it would voluntarily withhold another 1 million barrels/day of oil production starting in July. The pullback appears to be rooted in the ongoing concerns over global demand after a soft PMI report for May while markets start to focus on what the FED will do at its FOMC meeting next week.

The lack of follow through to the upside leaves petroleum futures stuck in neutral technical territory, and since the top end of the recent trading range didn’t break, it seems likely we could see another test of the lower end of the range in the near future.  

RIN prices have dropped sharply in the past few sessions, with traders apparently not waiting on the EPA’s final RFS ruling – due in a week – to liquidate positions. D6 values dropped to their lowest levels in a year Monday, while D4 values hit a 15-month low. In unrelated news, the DOE’s attempt to turn seaweed into biofuels has run into a whale problem.  

Valero reported a process leak at its Three Rivers TX refinery that lasted a fully 24 hours.  That’s the latest in a string of upsets for south Texas refineries over the past month that have kept supplies from San Antonio, Austin and DFW tighter than normal. Citgo Corpus Christi also reported an upset over the weekend at a sulfur recovery unit. Several Corpus facilities have been reporting issues since widespread power outages knocked all of the local plants offline last month.  

Meanwhile, the Marathon Galveston Bay (FKA Texas City) refinery had another issue over the weekend as an oil movement line was found to be leaking underground but does not appear to have impacted refining operations at the facility. Gulf Coast traders don’t seem concerned by any of the latest refinery issues, with basis values holding steady to start the week.

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