Energy Futures Weaken

Market TalkWednesday, Sep 11 2019
Energy Futures Weaken

After starting yesterday on a strong positive note, energy futures weakened into Tuesday’s settlement on news that the Trump administration has asked for John Bolton’s resignation, a move that is expected to be beneficial for tensions in the Middle East. The former National Security Advisor had a reputation of taking a hard stance on Iran and its oil exports. WTI futures ended the day down about 50 cents per barrel while prompt month gas and diesel contracts held on in positive territory, each showing about half a cent in gains.

Buying quickly resumed later that afternoon after the American Petroleum Institute published its weekly inventory report, showing a 7.2 million barrel draw in US crude oil inventories, bringing the net change in stockpile levels for 2019 around -26 million barrels, according to the Institute. Prices are up slightly this morning, somewhat confident the drawdown in stocks is accurate, but traders will likely wait until confirmation of the draw’s magnitude by the DOE’s report, due out at 9:30AM CDT this morning.

The EIA published their monthly Short Term Energy Outlook yesterday with a somewhat neutral forecast of things to come in 2019 and 2020. While fuel consumption growth is projected to weaken for the rest of 2019, they anticipate it will bounce back in 2020 due to global economic expansion. The Administration also anticipates US oil production growth to slow between this year and next, citing relatively flat oil prices as the main driver. It will be interesting to see if renewed efforts by OPEC to avoid a further global surplus of oil will have a tangible effect on prices and likewise US production levels.

Tropical Disturbance 1 which is currently just Southeast of the Bahamas now has a 40-60% chance of cyclonic development over the next 5 days as it moves into the Gulf of Mexico. While prompt attention will likely be paid to the closest threat to the American mainland, two more areas to watch are creeping West across the Atlantic as well, making for a very busy September.

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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.