Energy Markets Digest Monthly Data Deluge

Market TalkWednesday, Oct 14 2020
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The back and forth action continues as energy markets try to digest the monthly data deluge of inventory reports from the alphabet soup of global energy agencies. Prices were moving lower overnight, wiping out Tuesday’s modest gains, but have recovered in the past hour and most contracts are now clinging to small gains on the day.

While futures continue to chop back and forth in their sideways range, cash markets are flashing warning signals as basis values – particularly for gasoline – are sliding now that the latest hurricane threat is behind us and most refineries appear to have escaped once again with minimal impact. Those weaker basis values have spot gasoline prices threatening the lower end of their trading range, and suggest it’s likely we’ll see some spot markets below $1/gallon in the near future. Diesel basis values have also been slipping lately, even as Midwestern states reach peak harvest demand, but diesel prices will still have more room to drop before threatening the bottom end of their range.

OPEC’s monthly oil market report was highlighted by a drop in production from the cartel, as the UAE finally came around to making up for its overproduction earlier in the year and slashed its output. The ¼ million barrel/day reduction was enough to offset gains from Libya, Iran, Iraq and Angola. The report painted a cautious outlook on demand as COVID cases are rising rapidly around the world as cooler weather forces people indoors, and highlights numerous challenges for refiners in the months ahead.

The IEA’s monthly oil market report was headlined “a moving target” as the spike in case counts threatens the global economic recovery. While the official projections remained relatively the same as last month, the report also suggests that refiners are in for more tough times ahead as the rapid increase in run rates this summer outkicked its coverage, forcing margins sharply lower in the fall, and the winter looking like it could be worse. 

The EIA’s monthly drilling productivity report forecasts a drop in oil output from the major U.S. shale plays in November, following several months of recovery. The report also highlighted that there are still more than 7,500 drilled but uncompleted (DUC) wells across the major shale basins, which will take years to work through at the current rate, and provide a cushion to the U.S. supply network if demand picks up faster than drillers can keep up, which seems to be a quaint idea at this point in time. 

The EIA also published a look at international electricity markets this morning, projecting the growth in demand driven by developing nations in the next 30 years, while renewable options like wind/solar and hydropower will be the driver of growth in supply. 

The weekly inventory reports are delayed a day by the partial holiday formerly known as Columbus Day, so the API’s will be out this afternoon and the DOE’s tomorrow. 

The lone disturbance in the Atlantic being tracked by the NHC has been reduced to just 10% odd of development over the next five days.

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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.