Energy Futures Ticking Modestly Higher

Market TalkThursday, Oct 10 2019
Heavy Selling In Energy Futures

Energy futures are ticking modestly higher to start Thursday’s session as equity markets continue to focus on China drama in various forms, while OPEC just sent a signal that they may want to act to keep prices from dropping any further.

OPEC’s monthly oil market report was highlighted by yet another reduction in global demand forecasts. The Cartel suggested all options will remain open at its December meeting, although getting Saudi Arabia and Iran to cooperate on anything this year seems to be easier said than done. OPEC’s output dropped sharply as expected in the wake of the attacks on Saudi facilities, but all indications are that most if not all of their production is back online already.

Ethanol prices stole the show Wednesday with spot values rallying some 13-15 cents around the country after the DOE’s inventory report showed the largest weekly drop in inventories on record. RIN values did not join in on the binge buying of fuel-grade alcohol as doubts appear to be creeping in on the impact of the EPA’s “deal” to update the RFS.

The most notable data point for petroleum in the report was another large drop in refinery runs (even though PADD 5 rates recovered) as maintenance activity this fall surpasses most forecasts. PADD 1 was particularly notable as it approached a decade-low as Monroe’s refinery is off-line for work. That low run rate seems to be driving counter-seasonal strength in RBOB calendar and basis spreads.

US diesel inventories continue to trend near the low end of their seasonal range in most US markets, and helping to keep upward pressure on futures which are now up for a 6th straight session. The notable exception is the Midwest, which is now staring down a winter storm that will hamper harvest efforts in the latest bit of bad news for agriculture interests in a brutal 2019.

Still wondering why west coast gasoline prices spiked by more than a dollar in the past couple of weeks? Take a look at the PADD 5 gasoline inventory chart below.

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

Energy Futures Ticking Modestly Higher gallery 0

News & Views

View All
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.