Energy Prices Pull Back To Start Wednesday's Session
Energy prices are pulling back to start Wednesday’s session after WTI, ULSD and the S&P 500 all hit new four-month highs Tuesday. Yesterday’s gains were fueled by optimism after European leaders worked out a stimulus package agreement, while today’s selling is being blamed on the latest dust up between the world’s two largest consumers.
The U.S. ordered China to close its consulate in Houston due to intellectual property concerns, which caused China to threaten retaliation. Video of people burning documents in the courtyard of the consulate adds to the intrigue of this event, as does the Houston location which happens to be the heart of the U.S. energy industry, although if the issue is related to energy markets in any way.
The API was reported to show a build in crude oil stocks of 7.5 million barrels last week – which is also getting credit for some of the early selling in energy futures – even though gasoline and diesel stocks both saw inventories decline by two million and 1.3 million barrels, respectively. The DOE’s weekly report is due out at its normal time this morning.
From a technical perspective, if WTI can weather this latest storm and hold above $41 and ULSD can hold above $1.24, the charts suggest more room to run to the upside, with the first big test at the 200 day MA for WTI just above $43. If prices fail to hold above those levels however, it seems we may return to the aimless sideways pattern that’s held prices for all of July. RBOB futures have been unable to keep up with ULSD and WTI lately, failing several times just below the 200 day moving average over the past four weeks, as buyers seem cautious to bet on higher gasoline prices now that the peak of driving season is in the rear-view mirror.
It’s already been a record setting season for tropical storm systems in the Atlantic, and now there are two more threats this week. One system in the Gulf of Mexico is given a 40 percent chance of development by the NHC as it heads towards the Texas coast, while another is expected to become Tropical Storm Gonzalo as it makes it way to the Caribbean, and could become a Gulf Coast threat next week.
Click here to download a PDF of today's TACenergy Market Talk.
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Week 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Gasoline and oil prices are attempting to rally for a 2nd straight day, a day ahead of the delayed OPEC meeting, while diesel prices are slipping back into the red following Tuesday’s strong showing.
The API reported gasoline inventories dropped by 898,000 barrels last week, crude inventories declined by 817,000 barrels while distillates saw an increase of 2.8 million barrels. Those inventory stats help explain the early increases for RBOB and WTI while ULSD is trading lower. The DOE’s weekly report is due out at its normal time this morning.
A severe storm on the Black Sea is disrupting roughly 2% of the world’s daily oil output and is getting some credit for the bounce in futures, although early reports suggest that this will be a short-lived event.
Chevron reported that its Richmond CA refinery was back online after a power outage Monday night. San Francisco spot diesel basis values rallied more than a dime Tuesday after a big drop on Monday following the news of that refinery being knocked offline.
Just a few days after Scotland’s only refinery announced it would close in 2025, Exxon touted its newest refinery expansion project in the UK Tuesday, with a video detailing how it was ramping up diesel production to reduce imports and possibly allow for SAF production down the road at its Fawley facility.
Ethanol prices continue to slump this week, reaching a 2-year low despite the bounce in gasoline prices as corn values dropped to a 3-year low, and the White House appears to be delaying efforts to shift to E15 in an election year.
Click here to download a PDF of today's TACenergy Market Talk.
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.