Energy Prices Were Seeing Some Modest Selling Overnight Following A Cease-Fire Agreement Between Israel And Hamas
Energy prices were seeing some modest selling overnight following a cease-fire agreement between Israel and Hamas, and the selling picked up steam around 7:15am following reports that OPEC is delaying its weekend meeting, which suggests the cartel members may be having a hard time reaching a consensus. Refined products were down 3-4 cents overnight, but those losses increased to 7-cents following the OPEC delay, wiping out a large portion of the gains we’ve seen the past few days.
The pullback has several short-term technical indicators flashing sell signals, just when it looked like prices might be ready to stage a breakout from the 3-month down trend. The good news for consumers is the pullback in prices since the summer means average retail prices across the US are down more than 10% from a year ago, right in time for one of the busiest travel days ever in the US.
Prices for gasoline space on Colonial have started to ease this week, dropping from 18-cents to 12, following promising reports of successful restart efforts at the Trainer PA refinery that had been shut down for extended maintenance. Diesel values continue to hold near their highest levels in a year above 14 cents/gallon as Gulf Coast refiners are seeing barrels back up, and shipping options are limited due to a variety of factors such as the shutdown of Kuwait’s huge refinery and chaos in the Panama Canal that is delaying resupply efforts in New York. Of course, if those gulf coast refiners weren’t limited by the Jones Act, the logistics would be much simpler.
Now would be the perfect time for either the Dangote refinery in Nigeria or the Dos Bocas refinery in Mexico to begin their long-overdue production and fill the void in the Atlantic basin, but despite so many promises that startup is imminent, neither facility appears to be selling any on-spec products yet.
Reminder that futures will trade in an abbreviated session tomorrow but will not settle. Friday will be another short trading session for futures, with a settlement posting. None of the spot market assessors will be open either day so many contract prices will hold through Monday, while rack prices may change depending on what the futures markets do while everyone is gone.
Click here to download a PDF of today's TACenergy Market Talk.
News & Views
View AllEnergy Futures Are Caught Up In Headline Tug-O-War This Morning
Energy futures are caught up in headline tug-o-war this morning with Canadian oil production concerns and a positive US GDP report trying to push prices higher while sinking Chinese demand worries and Gaza ceasefire hopes are applying downward pressure. The latter two seem to be favored more so far this morning with WTI and Brent crude oil futures down ~45 cents per barrel, while gasoline and diesel prices are down about half a cent and two cents, respectively.
No news is good news? Chicago gasoline prices dropped nearly 30 cents yesterday, despite there not being any update on Exxon’s Joliet refinery after further damage was discovered Wednesday. Its tough to say if traders have realized the supply situation isn’t as bad as originally thought or if this historically volatile market is just being itself (aka ‘Chicago being Chicago’).
The rain isn’t letting up along the Texas Gulf Coast today and is forecasted to carry on through the weekend. While much of the greater Houston area is under flood watch, only two refineries are within the (more serious) flood warning area: Marathon’s Galveston Bay and Valero’s Texas City refineries. However, notification that more work is needed at Phillip’s 66 Borger refinery (up in the panhandle) is the only filing we’ve seen come through the TECQ, so far.
Premiums over the tariff on Colonial’s Line 1 (aka linespace value) returned to zero yesterday, and actually traded in the negatives, after its extended run of positive values atypical of this time of year. Line 1’s counterpart, Line 2, which carries distillates from Houston to Greensboro NC, has traded at a discount so far this year, due to the healthy, if not over-, supply of diesel along the eastern seaboard.
Click here to download a PDF of today's TACenergy Market Talk.
WTI And Brent Crude Oil Futures Are Trading ~$1.50 Per Barrel Lower In Pre-Market Trading
The across-the-board drawdown in national energy stockpiles, as reported by the Department of Energy yesterday, stoked bullish sentiment Wednesday and prompt month gasoline, diesel, and crude oil futures published gains on the day. Those gains are being given back this morning.
The surprise rate cut by the People’s Bank of China is being blamed for the selling we are seeing in energy markets this morning. While the interest rate drop in both short- and medium-term loans won’t likely affect energy prices outright, the concern lies in the overall economic health of the world’s second largest economy and crude oil consumer. Prompt month WTI and Brent crude oil futures are trading ~$1.50 per barrel lower in pre-market trading, gasoline and diesel are following suit, shaving off .0400-.0450 per gallon.
Chicagoland RBOB has maintained its 60-cent premium over New York prices through this morning and shows no sign of coming down any time soon. Quite the opposite in fact: the storm damage, which knocked Exxon Mobil’s Joliet refinery offline on 7/15, seems to be more extensive than initially thought, potentially extending the repair time and pushing back the expected return date.
There are three main refineries that feed the Chicago market, the impact from one of them shutting down abruptly can be seen in the charts derived from aforementioned data published by the DOE. Refinery throughput in PADD 2 dropped 183,000 barrels per day, driving gasoline stockpiles in the area down to a new 5-year seasonal low.
While it seems all is quiet on the Atlantic front (for now), America’s Refineryland is forecasted to receive non-stop rain and thunderstorms for the next four days. While it may not be as dramatic as a hurricane, flooding and power outages can shut down refineries, and cities for that matter, all the same, as we learned from Beryl.