Energy Prices Modestly Higher to Start Tuesday, EIA's STEO Imminent

Market TalkTuesday, Jul 11 2023
Pivotal Week For Price Action

The choppy action continues with energy prices seeing modest gains to start Tuesday’s trading, after a back-and-forth session Monday ended with small losses. 

ULSD futures did manage to set a new 3-month high intra-day Monday, and are holding near those levels this morning, so could be poised for a small technical break out to the upside if they can get north of $2.60. WTI is also hovering near the top end of its summer trading range, which could help make the case for stronger diesel prices ahead, even though gasoline prices are lagging as 2 of the big 3 summer driving holidays are now in the rear-view mirror.  

Later this morning we’ll see the EIA’s monthly energy outlook with updated price and supply forecasts for the year.  Yesterday the agency highlighted how biofuels are displacing distillates on the West Coast due to the rapid influx of Renewable Diesel coinciding with expanding environmental credit programs in California, Oregon and Washington.  A recent article from McKinsey highlights the challenges faced by refiners looking to convert units to product more RD and SAF, and projects that the rapid increase in biofuel production is about to plateau. 

California spot markets continue to be the highest in the nation, even before adding on the highest taxes & environmental fees of any state, after another unplanned refinery hiccup in the LA area Monday. The Midwest is facing the opposite problem these days, with spot markets already pricing in big discounts for distillates and a Detroit refinery requesting permission to increase production to full capacity that will add to the oversupply if approved. 

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

Market Talk Update 07.11.23

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Pivotal Week For Price Action
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.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

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.

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