Energy Markets Trading Modestly Lower

Market TalkTuesday, Oct 16 2018
Energy Markets Trading Modestly Lower

Energy markets are trading modestly lower to start Tuesday’s session as global equity markets seem to have settled down a bit, as has the rhetoric over tensions between the US and Saudi Arabia, which only yesterday had several market watchers calling for $100 and even $400 oil prices if the world’s largest producers decided to brandish the oil weapon.

Right on cue, the EIA published a note this morning highlighting the rapid changes in the US Energy Trade balance over the past decade, with Canada now sending more oil to the US, than the rest of the world combined.

The good news for US consumers with those Canadian imports is that prices are less affected by issues such as the tensions with Saudi Arabia (as several news outlets have highlighted this week, it’s not 1973) or even the sanctions on Iran. Unfortunately for Canadian producers, since most of its exports go to US refiners, logistical bottlenecks coupled with a busy maintenance schedule for refiners as we’re seeing in PADD 2 currently has driven prices to the $25 range even while other oil grades are still going for more than $80.

Spot gasoline prices in the Portland spot trading hub (also known as the PNW) plunged more than 30 cents/gallon Monday as local refiners came back online after last week’s natural-gas pipeline explosion caused them to cut rates.

A week after an explosion shut the Irving refinery in Saint John NB, the Canadian version of OSHA has still yet to examine the site due to safety concerns, leaving plenty of uncertainty as to when the plant will resume operations. The refinery is above average at 320,000 barrels/day, but it’s location is what gives its strong influence on US gasoline and diesel markets from New York City through New England, meaning it could still create a price reaction for futures markets even though the downtime has become yesterday’s news.

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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.

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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.

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