Energy Markets Try To Claw Back

Market TalkWednesday, Jul 21 2021
Pivotal Week For Price Action

Energy markets are trying to claw back after Monday’s big sell-off, with equity markets appearing to be giving them a boost for a 2nd straight day. 

The API was reported to show a build in crude oil stocks of 806,000 barrels last week, which would snap a 2 month long streak of inventory declines. Gasoline inventories were also said to have built by 3.3 million barrels, while distillates dropped by 1.2 million. Prices sold off in the immediate aftermath of that report, and RBOB actually flipped back into negative territory after settling up nearly 2 cents, but it appears that report’s influence ended overnight.  

The DOE’s weekly report is due out at its normal time this morning (although there was an unscheduled hour-long delay last week). We’ve seen big swings in demand the past two weeks, and if the pattern holds, we should see an increase in consumption estimates this week.

A Reuters report Tuesday said that the White House is intervening to delay the annual target setting for the RFS, seeking a solution to the political football that has left refiners and biofuel producers in political purgatory for the past 15 years. While that’s a noteworthy headline, the reality is the EPA has already delayed setting the RVO’s for this year, and is already behind schedule for 2022, as it struggles with the fact that it’s physically impossible to meet the statutory limits set in the law.  

Meanwhile, senators from PA, ME, NJ and CA proposed new legislation to repeal the ethanol mandate from the RFS, while leaving the requirements for “advanced” biofuels, saying that “…the RFS drives up the cost of gas and food, harms our environment, and damages engines.”

RIN values didn’t seem to have a big reaction to either story, trading higher in the morning and then pulling back in afternoon to end the day with small gains. 

The tropics have been quiet since Elsa set records a few weeks ago, in large part thanks to heavy layers of Saharan dust prohibiting development. The NHC is giving 20% odds of a system developing off of the South East US coastline over the next 5 days, but even if that system does get named, it’s unlikely to become a major storm, and is not in a position to threaten the energy supply network.

An IEA report details how  spending on clean energy options is falling woefully short of what’s necessary to meet climate goals, even as record amounts of money are printed to aid economies around the world recover from the pandemic. (Charts Below). 

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

TACenergy MarketTalk 7.21.21

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Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Jul 17 2024

Energy Markets Are Trying To Find A Price Floor After Gasoline And Crude Oil Staged A Healthy Bounce To Minimize The Heavy Losses

Energy markets are trying to find a price floor after gasoline and crude oil staged a healthy bounce to minimize the heavy losses we saw early in Tuesday’s session. WTI is leading the move higher early Wednesday, up nearly $.90/barrel in the early going, while RBOB prices are up just under a penny.

Diesel continues to look like the weak link in the energy chain both technically and fundamentally. Tuesday the API reported a 4.9 million barrel build in diesel stocks, while gasoline inventories were only up 365,000 barrels, and crude oil stocks declined by more than 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning and it’s likely we’ll see a reduction in oil output and PADD 3 refining runs thanks to shut ins ahead of Hurricane Beryl, but otherwise the storm appears to be a relative non-issue with only 1 notable refining hiccup, that wasn’t even as bad as a midwestern Thunderstorm.

Chicago basis values rallied Tuesday after reports that Exxon had shut down the 250mb/day Joliet refinery following severe storms that knocked out power to the area Sunday. RBOB differentials surged nearly 9 cents on the day, while diesel diffs jumped more than a nickel. With 3 large refineries in close proximity, the Chicago cash market is notoriously volatile if any of those facilities has an upset. Back in May there was a one-day spike in gasoline basis of more than 50 cents/gallon after Joliet had an operating upset so don’t be surprised if there are bigger swings this week if the facility doesn’t come back online quickly.

Moving in the opposite direction, California basis values are heading the opposite direction with the transition to August scheduling pressuring CARBOB differentials in LA and San Francisco to their biggest discounts to prompt RBOB futures in more than 18 months. Gasoline imports into PADD 5 have held well above average levels over the past 2 months, which has more than offset the loss of the P66 Rodeo refinery’s output after it completed its conversion to RD production, in another sign of how growing refining capacity in China and other Asian countries may become more influential to the US. California regulators may also pat themselves on the back that their new plans to force refineries to report their gross profit monthly, in addition to the rules requiring all bulk trades in the state be reported must be driving the lower gasoline differentials, assuming they figure out what a basis differential is.

Meanwhile, California’s Carbon Allowance values have tumbled to their lowest levels in a year after a CARB presentation last week suggested the agency would be delaying long-anticipated tightening of the Cap and Trade program until 2026.

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

Pivotal Week For Price Action
Market TalkTuesday, Jul 16 2024

The Sell-Off In Energy Markets Continues, With Refined Products Reaching Their Lowest Levels In A Month Early In Tuesday’s Session

The sell-off in energy markets continues, with refined products reaching their lowest levels in a month early in Tuesday’s session. Reports of slowing growth in China, the world’s largest oil purchaser, is getting much of the credit for the slide in prices so far this week, although that doesn’t do much to explain why refined products are outpacing the drop in crude.

ULSD futures are leading the early move lower, trading down a nickel on the day, and marking a 19 cent drop since July 4th. There’s not much in the way of technical support for ULSD, so don’t be surprised if this sell-off continues to pick up steam.

With today’s slide, RBOB futures are down 17 cents from where they were trading on July 4th, and are just a couple of cents from testing their 200-day moving average. Should that support break, it looks like there’s a good chance to test the June lows around $2.29.

Physical markets are not offering any strength to the futures market with all 6 of the major cash markets for diesel across the US trading at a discount to ULSD futures, while only 1 gasoline market is trading at a premium to RBOB futures. That combination of weakness in futures and cash markets is going to be troubling for refiners who are seeing margins reduce during what is traditionally a strong time of year.

The EIA highlighted the energy trade between the US and Mexico in a report Monday, showing that despite so many claims of energy independence from Mexican officials, the actual amount of refined fuels and natural gas bought from the US continues to increase. That’s good news for many US refiners who have become more dependent on Mexican purchases to find a home for their output.

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