Energy Prices Were Seeing Some Modest Selling Overnight Following A Cease-Fire Agreement Between Israel And Hamas

Market TalkWednesday, Nov 22 2023
Pivotal Week For Price Action

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.

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Market Talk Update 11.22.2023

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Market TalkFriday, Jul 19 2024

Summertime-Friday-Apathy Trade Influencing Energy Markets

Energy markets are treading water to start the day as the Summertime-Friday-Apathy trade seems to be influencing markets around the world in the early going. RBOB futures are trying for a 3rd straight day of gains to wipe out the losses we saw to start the week, while ULSD futures continue to look like the weak link, trading lower for a 2nd day and down nearly 3 cents for the week.

Bad to worse: Exxon’s Joliet refinery remains offline with reports that repairs may take through the end of the month. On top of that long delay in restoring power to the facility, ENT reported this morning that the facility has leaked hydrogen fluoride acid gas, which is a dangerous and controversial chemical used in alkylation units. Chicago basis values continue to rally because of the extended downtime, with RBOB differentials approaching a 50-cent premium to futures, which sets wholesale prices just below the $3 mark, while ULSD has gone from the weakest in the country a month ago to the strongest today. In a sign of how soft the diesel market is over most of the US, however, the premium commanded in a distressed market is still only 2 cents above prompt futures.

The 135mb Calcasieu Refinery near Lake Charles LA has been taken offline this morning after a nearby power substation went out, and early reports suggest repairs will take about a week. There is no word yet if that power substation issue has any impacts on the nearby Citgo Lake Charles or P66 Westlake refineries.

Two tanker ships collided and caught fire off the coast of Singapore this morning. One ship was a VLCC which is the largest tanker in the world capable of carrying around 2 million barrels. The other was a smaller ship carrying “only” 300,000 barrels (roughly 12 million gallons) of naphtha. The area is known for vessels in the “dark fleet” swapping products offshore to avoid sanctions, so a collision isn’t too surprising as the vessels regularly come alongside one another, and this shouldn’t disrupt other ships from transiting the area.

That’s (not) a surprise: European auditors have determined the bloc’s green hydrogen goals are unattainable despite billions of dollars of investment, and are based on “political will” rather than analysis. Also (not) surprising, the ambitious plans to build a “next-gen” hydrogen-powered refinery near Tulsa have been delayed.

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Market TalkThursday, Jul 18 2024

Refined Products Stanch Bleeding Despite Inventory Builds And Demand Slump

Refined products are trading slightly lower to start Thursday after they stopped the bleeding in Wednesday’s session, bouncing more than 2 cents on the day for both RBOB and ULSD, despite healthy inventory builds reported by the DOE along with a large slump in gasoline demand.

Refinery runs are still above average across the board but were pulled in PADD 3 due to the short-term impacts of Beryl. The Gulf Coast region is still outpacing the previous two years and sitting at the top end of its 5-year range as refiners in the region play an interesting game of chicken with margins, betting that someone else’s facility will end up being forced to cut rates before theirs.

Speaking of which, Exxon Joliet was reportedly still offline for a 3rd straight day following weekend thunderstorms that disrupted power to the area. Chicago RBOB basis jumped by another dime during Wednesday’s session as a result of that downtime. Still, that move is fairly pedestrian (so far) in comparison to some of the wild swings we’ve come to expect from the Windy City. IIR via Reuters reports that the facility will be offline for a week.

LA CARBOB differentials are moving in the opposite direction meanwhile as some unlucky seller(s) appear to be stuck long and wrong as gasoline stocks in PADD 5 reach their highest level since February, and held above the 5-year seasonal range for a 4th consecutive week. The 30-cent discount to August RBOB marks the biggest discount to futures since 2022.

The EIA Wednesday also highlighted its forecast for rapid growth in “Other” biofuels production like SAF and Renewable Naptha and Propane, as those producers capable of making SAF instead of RD can add an additional $.75/gallon of federal credits when the Clean Fuels Producer’s Credit takes hold next year. The agency doesn’t break out the products between the various “Other” renewable fuels, but the total projected output of 50 mb/day would amount to roughly 2% of total Jet Fuel production if it was all turned to SAF, which of course it won’t as the other products come along for the ride similar to traditional refining processes.

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Pivotal Week For Price Action