Energy Prices Wilt In Early Morning Trading, Mimicking Eagles' Second Half Performance

Market TalkMonday, Feb 13 2023
Pivotal Week For Price Action

Refined products are seeing modest losses this morning, after nickel gains on Friday and following a choppy overnight session that swung between losses and gains. The lack of staying power to the rally sparked Friday following Russia’s threat to cut oil output in retaliation for price cap and embargo restrictions shows that Putin’s energy weapon is diminishing as the world has had more time to adjust to its new supply realities. 

Russia’s fuel exports were estimated to drop by 10% in the first week since the EU embargo took hold, although stormy weather and tanker delays may be playing more of a role in those early numbers than a lack of buyers under the new price cap system.

The CFTC didn’t publish the commitments of traders report for a 2nd week due to the fallout from a ransomware attack at one of its reporting entities. Because of that, we won’t know how the big money hedge funds reacted to the plunge in prices to start February, or the bounce last week for a while longer.

Baker Hughes reported an increase of 10 oil rigs, and a decrease of 8 natural gas rigs drilling in the US last week. The decline in natural gas rigs is the largest drop in 5 years, and comes as US Shale producers face the challenges of operating in a world in desperate need of their product, but there still are not enough outlets to freeze and ship it overseas. The much warmer than normal winter is also playing a part, with reports suggesting that cuts are needed in some areas to prevent storage reaching capacity. New Mexico and Louisiana led the increase in oil rigs, while Texas accounted for a drop of 7 rigs total.

The Dallas FED released a study last week showing that business activity in Texas continues to expand, albeit at a very slow pace over the past 6 months. The report also showed “tentative” signs that the labor market was finally cooling, although the Lone Star state continues to outpace the rest of the country in jobs growth.

Flint Hills reported a leak from an unknown source in its storm water sewer system at its refinery in Corpus Christi on Sunday.  So far, that leak doesn’t seem to have impacted operations, although the cause it still unknown. Exxon also reported a minor upset that caused flaring over the weekend at its Baytown plant, which is undergoing a major turnaround event and is therefore unlikely to have any impact on markets. 

Suncor announced Friday that it was beginning restart on 1 of its 3 production units at its Commerce City refining complex, which should help alleviate the supply shortages in Colorado as soon as this week, as long as those restart efforts – which are often the most dangerous part of a refineries operations - go well.

No word yet if any of the 3 remaining Philadelphia area refineries had issues overnight after their team flamed out in the 2nd half.

In case you missed it last week (like I did) here’s a quick read from the WSJ on the history of the Jones Act and how it affects today’s home heating prices. 

Click here to download a PDF of today's TACenergy Market Talk.

Market Talk Update 02.13.2023

News & Views

View All
Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures

The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.

The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.

We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.

The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.

Click here to download a PDF of today's TACenergy Market Talk.

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day

The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.

There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.

As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.

Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Pivotal Week For Price Action