Energy Prices Were Seeing Another Healthy Selloff Overnight

9:30 am update
Gasoline prices have jumped since the weekly DOE report, and our emails seem to be back up finally, both of which are exciting.
Import/export flows are factoring heavily into the weekly stats with Gasoline exports accounting for half of the inventory draw down, while a decline in distillate and crude oil exports on the week explains why those products gained. Refinery runs increased in every PADD, with PADD 1 rates jumping 10% on the week, no doubt due to PBF restarting the crude unit at their NJ facility that had been shuttered due to weak economics last year.
From the 8am market update:
Energy prices were seeing another healthy selloff overnight, after a big Tuesday rally, but have since cut those losses following the latest reading on inflation in the US.
Gasoline and crude prices both turned positive, Diesel nearly wiped out 10 cent losses and stock markets rallied sharply this morning after the July CPI reading came in unchanged for the month, a sign that US inflation has peaked, and that the FED can take it easy on free money crowd. The drop in gasoline and other fuel prices was the main driver of cooling inflation in July, while prices for food and shelter both continued to increase.
Another large part of the yo-yo action in prices the past couple of days is being blamed on flows of Russian oil to several land-locked European nations. Tuesday, Russia’s pipeline company Transneft announced that flows on that pipeline were being cut since sanctions prevented payment for that fuel, and that coincided with the strong price rally. This morning, Hungary announced it was paying fees to allow shipments to resume temporarily, and prices are moving lower once again.
Another factor stirring up the action in Diesel prices this week: Low water levels on the Rhine river are disrupting one of Europe’s most crucial arteries for transporting energy supplies, right when the continent can least afford another supply snag.
Speaking of which, NY Harbor gasoline prices continue to trade 40 cents or more above their Gulf Coast counterparts, with a steeply backwardated curve hanging on for another week. This unusual phenomenon was highlighted in the DOE/EIA’s Short Term Energy Outlook this week, noting how refinery shutdowns along the East Coast of Canada and the US and reduced imports from Europe due to their energy crisis are both contributing to this phenomenon.
The monthly STEO also highlighted the tight global market for distillates, with the major supply centers in the US, Europe and Asia all holding 30-40% less inventory than their 5 year averages. The report does predict that rising output in the US should help inventories to heal modestly in the coming month, but highlights the threat that the looming hurricane season pose to those estimates.
Speaking of which, the area of storms moving across the Atlantic currently known as Invest 97L was downgraded overnight and now has only a 30% chance of getting a real name this week. If that system is named, long range projections peg it moving towards the East Coast, rather than into the Gulf of Mexico, which is good news for oil producers and refiners, but bad news for the beleaguered region that’s been struggling to get fuel supplies caught up ever since the start of the war in Ukraine.
The API reported builds in crude oil and distillate inventories last week of 2.1 and 1.4 million barrels respectively, while gasoline stocks drew by 600,000 barrels. The DOE/EIA’s version of the weekly status report is due out at its normal time this morning.
Click here to download a PDF of today's TACenergy Market Talk.
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Energy Prices Fluctuate: Chinese Imports Surge, Saudi Arabia Cuts Output and Buys Golf
Energy prices continue their back-and-forth trading, starting Wednesday’s session with modest gains, after a round of selling Tuesday wiped out the Saudi output cut bounce.
A surge in China’s imports of crude oil and natural gas seem to be the catalyst for the early move higher, even though weak export activity from the world’s largest fuel buyer suggests the global economy is still struggling.
New tactic? Saudi Arabia’s plan to voluntarily cut oil production by another 1 million barrels/day failed to sustain a rally in oil prices to start the week, so they bought the PGA tour.
The EIA’s monthly Short Term Energy Outlook raised its price forecast for oil, citing the Saudi cuts, and OPEC’s commitment to extend current production restrictions through 2024. The increase in prices comes despite reducing the forecast for US fuel consumption, as GDP growth projections continue to decline from previous estimates.
The report included a special article on diesel consumption, and its changing relationship with economic activity that does a good job of explaining why diesel prices are $2/gallon cheaper today than they were a year ago.
The API reported healthy builds in refined product inventories last week, with distillates up 4.5 million barrels while gasoline stocks were up 2.4 million barrels in the wake of Memorial Day. Crude inventories declined by 1.7 million barrels on the week. The DOE’s weekly report is due out at its normal time this morning.
We’re still waiting on the EPA’s final ruling on the Renewable Fuel Standard for the next few years, which is due a week from today, but another Reuters article suggests that eRINs will not be included in this round of making up the rules.
Click here to download a PDF of today's TACenergy Market Talk.

Week 23 - US DOE Inventory Recap

Energy Prices Retreat, Global Demand Concerns Loom
So much for that rally. Energy prices have given back all of the gains made following Saudi Arabia’s announcement that it would voluntarily withhold another 1 million barrels/day of oil production starting in July. The pullback appears to be rooted in the ongoing concerns over global demand after a soft PMI report for May while markets start to focus on what the FED will do at its FOMC meeting next week.
The lack of follow through to the upside leaves petroleum futures stuck in neutral technical territory, and since the top end of the recent trading range didn’t break, it seems likely we could see another test of the lower end of the range in the near future.
RIN prices have dropped sharply in the past few sessions, with traders apparently not waiting on the EPA’s final RFS ruling – due in a week – to liquidate positions. D6 values dropped to their lowest levels in a year Monday, while D4 values hit a 15-month low. In unrelated news, the DOE’s attempt to turn seaweed into biofuels has run into a whale problem.
Valero reported a process leak at its Three Rivers TX refinery that lasted a fully 24 hours. That’s the latest in a string of upsets for south Texas refineries over the past month that have kept supplies from San Antonio, Austin and DFW tighter than normal. Citgo Corpus Christi also reported an upset over the weekend at a sulfur recovery unit. Several Corpus facilities have been reporting issues since widespread power outages knocked all of the local plants offline last month.
Meanwhile, the Marathon Galveston Bay (FKA Texas City) refinery had another issue over the weekend as an oil movement line was found to be leaking underground but does not appear to have impacted refining operations at the facility. Gulf Coast traders don’t seem concerned by any of the latest refinery issues, with basis values holding steady to start the week.
Click here to download a PDF of today's TACenergy Market Talk.