Energy Futures Lower After Reversing Gains Seen Yesterday
Energy futures are lower so far this morning after reversing some gains seen during yesterday’s abbreviated trading session. Prompt month gasoline, diesel, and crude oil futures are all down nearly 1.5% to start the day. A decision to cut October prices for oil sales to Asia by Saudi Arabia is taking credit for the selloff today as some interpret the move as the Kingdom’s anticipation for weak short-term demand.
Repairs are underway and production is coming back online in the areas hit by Hurricane Ida last week. It seems that the plants in the Baton Rouge area have all resumed (or in the process of resuming) operations while five refineries in the New Orleans area are still waiting for the restoration of power and/or repair damage to start cranking back up.
In addition of refinery shutdowns, Baker Hughes reported a total of 11 active oil platform closures across the nation last week. The 14 rigs closed in Louisiana ahead of Hurricane Ida were barely offset by the spare opening of production sites in Alaska, New Mexico, and Oklahoma. It would not be a surprise to see these rigs come back online as repairs are completed.
It looks like the NE has dodged a bullet this week: Hurricane Larry’s projected path has shifted east over the weekend. As it currently stands only the Canadian Province of Newfoundland remains in the storm’s path. The northern Atlantic seaboard is breathing a sigh of relief this morning as another storm hitting in such quick succession could have made an already dismal situation even worse.
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.