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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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.