Energy Supply Crisis In Europe Spreads

Market TalkMonday, Sep 27 2021
Pivotal Week For Price Action

Diesel prices are pushing to fresh 3 year highs, and Brent crude is making a run at the $80 mark as an energy supply shortage is spreading across parts of the world. RBOB and WTI prices are lagging behind, but still pushing solid gains to start the week.  

Today’s price action seems to reflect that the Energy supply crisis in Europe is spreading, and forcing a severe dose of reality onto those with net-zero ambitions. As we’ve witnessed numerous times following supply disruptions in the US (whether that’s fuel, or toilet paper) panic buying is making the situation even worse, and causing many stations to run dry across the UK. It’s not just Europe that’s having problems, power shortages across China are promising to increase challenges for other supply chains that have been hampering global trade for the past year. 

Feast or famine: As parts of the world are struggling with a lack of natural gas, producing nations are still struggling with how to limit the excess gas that has to be burned off in flares.  See this financial times video on the work being done to improve that process. 

Hurricane Sam blew up into a Category 4 storm with sustained winds near 150 miles per hour over the weekend, but its track has shifted favorably and it appears that it will spare most Caribbean islands and the US East Coast. There is still a chance the storm could hit the Canadian coast as it travels north, but in terms of fuel supply disruptions this storm should be a non-event.  

The National Hurricane Center is tracking 3 other storm systems, 2 of which are given 80% odds of developing, and are in a position that gives them a chance at heading for either the Gulf or East coasts next week.

Not coincidentally, as diesel prices have reached 3 year highs, the bets placed on higher diesel prices by large speculators has also reached their highest levels since 2018. The money manager trade category is less enthusiastic about RBOB and WTI contracts however, reducing their net length in both last week. 

Baker Hughes reported 10 more oil rigs were put to work last week, the 2nd straight week of double digit increases. For months we’ve read stories about how US Producers were being more conservative as prices rose, and now we’ll see if that’s really true as an industry built by “WildCatters” is once again enjoying a very profitable market.

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

MT Update 9.27.21

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Pivotal Week For Price Action
Market TalkThursday, Mar 28 2024

Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

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
Pivotal Week For Price Action
Market TalkWednesday, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

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