Energy Futures Has Pulled Back From The Highs Seen During Yesterday’s Abbreviated Trading Session

Market TalkTuesday, Sep 6 2022
Pivotal Week For Price Action

Energy futures has pulled back from the highs seen during yesterday’s abbreviated trading session. The prompt month diesel contract has come down almost 15 cents since yesterday while WTI, America’s crude oil benchmark, made a run at the $90 level before pulling back and is now trading around $87 per barrel. New York gasoline is now trading just on the green side of flat, exchanging hands just half a cent above Friday’s settlement.

OPEC+ (aka OPEC & Friends/OPEC+Russia) surprised the energy market yesterday, announcing a small production cut for October, and spurred bullish price action Monday. Futures markets have cooled so far this morning after digesting that this “new” production level is just a reversion back to August’s supply expectation. The cartel bumped September’s production amount after meeting with the US President but has since clarified that increased supply was intended to be for one month only.

While not necessarily adding bearish sentiment, Russia’s declaration that it will respond to any imposed price cap on its oil exports by shipping to Asia will certainly be considered by anyone wanting to get long on oil. This announcement comes after the Group of Seven (G7) endorsed imposing a maximum price Russia could sell its oil for in order to trim the Kremlin’s hardy energy revenue stream. While requiring Russian’s to sell their product at discounts to current market value may seem like a great plan among the G7 countries, the idea’s practicality will hinge on compliance among several Asian countries, namely India and China.

The Atlantic hurricane season is continuing to ramp up so far this month. As hurricane Danielle continues to make it’s way Northeast in the top half of the Atlantic, Tropical storm Earl organized over the long weekend and will likely follow roughly the same path as it’s predecessor, steering clear of the US mainland and moving north, out to sea. Industry operators will still be keeping an eye on the couple of systems coming West off the coast of Africa as the closest of the pair has a 60% chance to exhibit cyclonic development over the next week.

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Market Talk Update 09.06.2022

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Pivotal Week For Price Action
Market TalkThursday, Feb 29 2024

It's Another Mixed Start For Energy Futures This Morning After Refined Products Saw Some Heavy Selling Wednesday

It's another mixed start for energy futures this morning after refined products saw some heavy selling Wednesday. Both gasoline and diesel prices dropped 7.5-8.5 cents yesterday despite a rather mundane inventory report. The larger-than-expected build in crude oil inventories (+4.2 million barrels) was the only headline value of note, netting WTI futures a paltry 6-cent per barrel gain on the day.

The energy markets seem to be holding their breath for this morning’s release of the Personal Consumption Expenditures (PCE) data from the Bureau of Economic Analysis (BEA). The price index is the Fed’s preferred inflation monitor and has the potential to impact how the central bank moves forward with interest rates.

Nationwide refinery runs are still below their 5-year average with utilization across all PADDs well below 90%. While PADD 3 production crossed its 5-year average, it’s important to note that measure includes the “Snovid” shutdown of 2021 and throughput is still below the previous two years with utilization at 81%.

We will have to wait until next week to see if the FCC and SRU shutdowns at Flint Hills’ Corpus Christi refinery will have a material impact on the regions refining totals. Detail on the filing can be found on the Texas Commission on Environmental Quality website.

Update: the PCE data shows a decrease in US inflation to 2.4%, increasing the likelihood of a rate cut later this year. Energy futures continue drifting, unfazed.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

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