Energy Markets Survive Heavy Wave Of Selling

Market TalkThursday, May 30 2019
Energy Markets Survive Heavy Wave Of Selling

The back and forth continues for energy markets after surviving another heavy wave of selling Wednesday, as traders react to the weekly inventory reports and a slew of minor supply disruptions across the midcontinent due to storms.

The API reported a draw in crude oil stocks of 5.3 million barrels, and a drop in distillates of 2.1 million barrels, while gasoline stocks increased by 2.7 million barrels. The overnight price reaction seems to match that report with WTI trying to hold onto gains, while RBOB futures try to drag the complex lower. The DOE/EIA’s report is due out at 10am central today.

More pipeline, refinery and terminal issues are popping up around the US due to the rash of severe storms that continue to sweep across the country. Wednesday the Explorer pipeline reported plans to shut part of its line near St. Louis due to flooding, while numerous terminals in the Midwest were said to be either running out of products, or forced to close directly or indirectly due to the storms. In some cases, power losses are to blame, while in others there are suggestions that the disruptions on crude pipelines and takeaway capacity from barges is forcing refineries from IL to LA to cut runs.

Interesting timing: A new note from the EIA this morning details the race to build new oil pipeline capacity in the Gulf Coast and Midwestern regions.

Interest rates took credit for much of the pessimism Thursday that had both equity and energy prices selling off sharply early in the day. The 10 year treasury yield dropped to its lowest level in nearly 2 years, while the treasury yield curves continued to get steeper. Bulls will shrug off the yield curve warning – suggesting that metric has predicted 7 of the last 3 recessions – while bears see this as a clear sign that investors are taking money off the table and buying up treasuries in a flight to safety.

Meanwhile, the US economy continues to keep chugging along with the 2nd look at Q1 GDP readings holding steady north of 3% this morning, which seems to have given both equities and energy futures a small boost off their overnight lows.

Reports that the US was blaming Iranian mines for the sabotage on 4 tankers in the Gulf of Oman earlier in May may have stirred markets up briefly during Wednesday’s afternoon bounce, but it appears the market is largely shrugging off that news as both sides seem to have limited their saber rattling in recent days.

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Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

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Pivotal Week For Price Action
Market TalkTuesday, Mar 26 2024

Refined Products Seeing Small Losses Of Around A Penny While Crude Oil Contracts Hover Just Above Break Even

Energy futures are taking a breather to start Tuesday’s trading, with refined products seeing small losses of around a penny while crude oil contracts hover just above break even.

No new news on either the Red Sea shipping or Russian Refining attacks this morning, so Cocoa prices seem to be taking over the commodity headlines while energy markets wait on their next big move.

RBOB gasoline futures set a new 6-month high Monday at $2.7711, which leaves the door open on the weekly charts for the spring rally to continue. A run at the $3 mark is certainly possible in the next few weeks before the typical seasonal price peak is set just before the start of driving season.

A container ship lost power and crashed into the Francis Scott Key bridge in Baltimore this morning, causing a devastating collapse. While cargo shipping into the area will no doubt be impacted by this event, fuel supplies are unlikely to see any notable change since the 9 fuel terminals in Baltimore are primarily supplied by Colonial pipeline. Barges from Philadelphia refineries do supplement Baltimore supplies at times, and those vessel flows will be impacted at least until rescue operations are completed and the bridge sections removed from the waterway. That said, since shipping up from the Gulf Coast via Colonial is generally cheaper than shipping an NY Harbor-priced barrel south, the amount of supply disrupted by this event will be minimal.

While we’re still waiting on the official forecasts for the Atlantic Hurricane season, early reports continue to suggest that we could be in for a very busy year due to warm water temperatures and a forming La Nina pattern.

Dallas meanwhile is preparing for a different sort of disruption, with city officials encouraging companies to let employees work from home during the solar eclipse on April 8th as metroplex traffic is expected to surge. While some isolated fuel outages are certainly possible if people start panic buying gasoline they don’t need, there’s no reason to expect any widespread impact from the demand spike.

Today’s interesting read: Why AI requires a staggering amount of electricity and may create supply competition for EVs that will end up benefitting fossil fuels.

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