Energy Prices Are Moving Lower Again To Start Wednesday’s Trading, After Tuesday’s Rally Attempt Was Repelled
Energy prices are moving lower again to start Wednesday’s trading, after Tuesday’s rally attempt was repelled. Negative demand news from China and inventory builds are getting credit for the early selling, while US stock markets are also seeing some modest losses this morning as control of the US congress remains in doubt after Tuesday’s elections
The API reported US commercial oil inventories increased by 5.6 million barrels last week, with 3.6 million barrels released from the SPR. Gasoline stocks also saw a sizeable build in gasoline stocks of 2.5 million barrels, while distillates declined by 1.7 million. The DOE’s weekly report is due out at its normal time this morning.
How much is diesel worth in New York these days? Depends on who you’re asking, and which day you want it. Yesterday, the two major spot pricing agencies were more than 45 cents/gallon apart on their assessment of “prompt” ULSD in the NYH spot market with one pegging them close to $5/gallon while the other was just above $4.50. The higher assessment places those barrels nearly $1.30 above USGC values, but by the time you could actually ship a barrel to the harbor from Houston, that spread is less than half of that.
West Coast basis values continue to rally, with LA Spot CARBOB approaching a $1/gallon premium to futures in Tuesday’s session, while diesel values rallied again, marking a 40 cent increase off of last week’s lows. A fire broke out overnight at an LA-area refinery, which certainly won’t help cool off prices, although the extent of any operational impact remains unclear, and the video showing firefighters standing just a few yards from the flames suggests it may not have been as severe an incident as the headlines may have you believe.
Tropical storm Nicole is still expected to reach Hurricane strength before making landfall in Florida overnight. A shift south in the storm’s path moves it more than 100 miles south of Cape Canaveral, after it looked like that port (and its fuel terminals) would be within 30 miles of the storm’s eye yesterday. That does mean the storm will be closer to the Pt Everglades facilities, but they’re still 80+ miles from the current path, and on the “clean” side of the storm that will be pushing water out to sea rather than inland. The new path also takes a direct hit on Orlando off the table, so at this point, it looks like we may see another bullet dodged for fuel supply facilities like we did with Ian. The storm will bring heavy rains to Charlotte and DC this weekend which could further pressure gasoline demand that has already started its seasonal slide.
Schadenfreude alert: Digital currencies that promised to replace cash are now crashing due to a lack of cash.
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View AllThe Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.
The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.
We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.
The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.
There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.
As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.
Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.