Energy Markets Flat This Morning

Energy markets are flat this morning, as the US takes a day to mourn a former president, one day ahead of what may be a pivotal OPEC meeting.
The recovery rally in petroleum futures seemed to run out of steam Tuesday, doubts over the Trade Truce and fears of a looming economic slowdown both domestically and abroad continue to build, sending US stock markets for another tumble. Although the correlation between equity and energy prices has been weak for the past few weeks, it certainly appeared that the stock market selling helped to stone-wall the buying spree in oil & products that we saw Tuesday morning.
US stock markets are closed today for a national day of mourning honoring George H.W. Bush, while energy markets are following their normal routine. The DOE weekly status report will be delayed until tomorrow.
The API was said to show inventory builds across the board yesterday, with oil stocks up more than 5.3 million barrels, diesel up 4.3 million and gasoline up by 3.6 million.
As the forward curve charts below demonstrate, the fall sell-off has also wiped out the backwardation (near term prices holding higher than longer term prices) that had become a mainstay for most petroleum contracts for much of the year. Given that the curves have flattened for a full 3 years, this suggests an expectation for ample supplies for an extended period of time, compared to a short term drop in demand (aka recession fears) driving the action.
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Week 48 - US DOE Inventory Recap
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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.