Energy Rally Takes A Breather

Market TalkWednesday, Jun 17 2020
Markets Caught In Another “Risk Off” Wave

The energy rally is taking a breather as inventory data gives the market reason to pause, even as equity markets continue to point higher.

The API reported inventory builds across the board in the U.S. last week with crude oil inventories up 3.8 million barrels, gasoline up 4.2 million barrels and distillates up by 900,000 gallons. The EIA’s report is due out at its normal time this morning.

OPEC’s monthly oil market report left demand estimates unchanged from their last report, a less optimistic view than the IEA and EIA which had both made small upward revisions to their consumption SWAGs. The report also noted that U.S. crude oil exports were holding steady as Asian demand picked back up, while refined product exports continue to suffer as demand from Latin America continues to languish. That combination continues to pressure U.S. refiners that are struggling with weak crack spreads, and near-record product inventories.

The $1.22 range is providing upside resistance for RBOB, with the front month contract trading near that level in six of the past eight sessions but failing to hold above that level each time. This was similar to the action we saw in April when the mid $0.70 range repelled a dozen or so rallies over the course of two weeks. That resistance leaves ULSD as the only one of the big four petroleum contracts reaching new recovery highs this week, and given that’s the lowest volume contract, it faces an uphill battle to pull the rest of the complex higher on its own.

Spot ethanol prices have returned to pre-COVID-19 levels this week as gasoline demand continues its slow march higher, while many ethanol production facilities are running below capacity, or splitting time with making sanitizing products. Just like in oil refineries, ethanol plants face a complicated logistical puzzle this year as they try to match the demand recovery that’s difficult to predict.

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Market TalkFriday, Mar 1 2024

Oil Futures Are Leading The Energy Complex In A Modest Rally To Begin March Trading

Oil futures are leading the energy complex in a modest rally to begin March trading, with WTI and Brent both up around $1.50/barrel, while refined products are adding around 2 cents in the early going.

RBOB gasoline futures rolled to a summer-grade RVP with the April contract in prompt position this morning. West Coast cash markets are already converted to summer grades, so they’re holding their premiums to futures, while the markets east of the Rockies are now trading at substantial discounts to futures as they move through their remaining winter-cycles over the next 4-6 weeks. The high trade for the April RBOB contract last month was just north of $2.63, which sets the first layer of resistance to a March madness gasoline rally just about 3 cents north of current values.

While gasoline looks somewhat bullish on the charts, and has seasonal factors working in its favor, diesel prices look weak in comparison with prices reaching a 6-week low Thursday before finally finding a bid, and the roll to April futures cut out 3 cents from prompt values. Diesel prices also don’t enjoy the seasonal benefits of gasoline, with a winter-that-wasn’t offering no help for supplemental diesel demand to replace natural gas in the US or Europe.

Speaking of winter weather, the West Coast continues to get the worst of it in 2024, with a casual 10 feet of snow with 100+ mile an hour wind gusts hitting the Sierra Nevada range. While the worst of that winter storm is happening far from the coast, the San Francisco bay area is under a gale warning starting this afternoon.

The wildfires in the Texas panhandle are now the largest in state history, impacting more than 1 million acres of land. The P66 Borger refinery is caught between the blazes, but so far has not reported any operational issues or plans to change operations at the facility. Valero’s McKee refinery is located just 50 miles from Borger, but looks to be far enough north and West to not be threatened by the fires, for now at least.

Mass Exxodus? A Reuters report noted that Exxon had notified its traders that it was cutting their salaries, in another sign that the major’s move back into trading wasn’t going so well. Exxon’s Exodus has already been a bit of a joke for the past few years, and now that the traders are being targeted, don’t be surprised if the cube photos are taken to a new level.

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

Pivotal Week For Price Action
Market TalkThursday, Feb 29 2024

It's Another Mixed Start For Energy Futures This Morning After Refined Products Saw Some Heavy Selling Wednesday

It's another mixed start for energy futures this morning after refined products saw some heavy selling Wednesday. Both gasoline and diesel prices dropped 7.5-8.5 cents yesterday despite a rather mundane inventory report. The larger-than-expected build in crude oil inventories (+4.2 million barrels) was the only headline value of note, netting WTI futures a paltry 6-cent per barrel gain on the day.

The energy markets seem to be holding their breath for this morning’s release of the Personal Consumption Expenditures (PCE) data from the Bureau of Economic Analysis (BEA). The price index is the Fed’s preferred inflation monitor and has the potential to impact how the central bank moves forward with interest rates.

Nationwide refinery runs are still below their 5-year average with utilization across all PADDs well below 90%. While PADD 3 production crossed its 5-year average, it’s important to note that measure includes the “Snovid” shutdown of 2021 and throughput is still below the previous two years with utilization at 81%.

We will have to wait until next week to see if the FCC and SRU shutdowns at Flint Hills’ Corpus Christi refinery will have a material impact on the regions refining totals. Detail on the filing can be found on the Texas Commission on Environmental Quality website.

Update: the PCE data shows a decrease in US inflation to 2.4%, increasing the likelihood of a rate cut later this year. Energy futures continue drifting, unfazed.

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

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