Energy Futures Fluctuating As Data Reflects US Consumers Tightening Purse Strings
Energy futures are ticking modestly higher this morning after a two-day selloff that pushed refined product prices down a nickel. However, a soft retail sales figure in June seems to be limiting the rally as it offers yet another data point that U.S. consumers are tightening their purse strings.
An EIA note this morning highlighted gasoline imports on the East Coast which reached their highest levels last month since COVID started, which has helped to alleviate the impact of unplanned maintenance at the region’s largest refinery. East Coast inventories remain below their 5-year range despite that increase in imports, which will put pressure on suppliers in the region for the next 2 months until RVP specs are relaxed in the fall.
The latest sign that the global diesel shortage is behind us: China’s diesel exports, which were a critical lifeline to Europe a year ago, have dropped to their lowest levels since May 2022 as demand for gasoline and Aviation fuels increased.
A critical piece in the diesel supply relaxation has been the rapid healing of natural gas inventories. The IEA Monday dug deeper into that crisis in its annual Global Gas security review, which urges more coordinated action between producers and consumers, which in some countries is AKA collusion.
Brewster’s Millions? Beleaguered Global Clean Energy Holdings has been offered a chance at a lifeline to salvage it's failing refinery RD conversion, but only if it can raise $10 million by July 31.
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The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.
The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.
We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.
The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.
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Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.
There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.
As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.
Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.