Equity Markets Point Higher
WTI and Brent are trading at new highs for the year to start the last trading day in March, as equity markets point higher on the day on renewed US-China trade optimism and the half-life of a President’s oil-related tweet impact on the market continues to shrink.
Unless there’s a dramatic mid-day reversal today (not expected) this is shaping up to be the strongest quarter for oil futures (along with several equity indices) since 2009. The heavy selling to end 2018 certainly set the stage for a recovery bounce, while OPEC cuts – both intentional and not – and a rash of refinery downtime – both planned and not – were also big contributors to the price rally.
Looking forward to the 2nd quarter, it seems the supply disruptions should be priced into the market, so additional upside may need to come from the demand side of the equation, and may hinge on whether or not the global economy continues to show signs of slowing down. This week’s dramatic reversal in gasoline prices seems to have burst the spring-breakout bubble, but there are still a few more weeks left in the RVP transition and there are 2 months until driving season officially kicks off so it’s still a little too soon to break out the calls for a seasonal top.
The latest in the Venezuela saga: Citgo has secured financing to continue its operations (which have to this point continued seemingly without issue since US sanctions on its parent company) while Russia is working on new ways to get the sanctioned crude to market, which I’m sure will be at a fair price if they succeed.
As part of its 2019 annual energy outlook, the EIA is highlighting its forecast that tight-oil, aka Shale plays will continue driving US oil production for the next few decades. The report is also suggesting that US oil production will continue climbing from its current record high of 12.1 million barrels/day to 14 million barrels/day in the next couple of years. At the same time, US tight-oil exports are facing new scrutiny as foreign buyers find issues with contamination caused by the comingled nature of US pipeline networks.
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Week 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
After Another Black Friday Selloff Pushed Energy Futures Sharply Lower In Last Week’s Holiday-Shortened Trading
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Week 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Gasoline and oil prices are attempting to rally for a 2nd straight day, a day ahead of the delayed OPEC meeting, while diesel prices are slipping back into the red following Tuesday’s strong showing.
The API reported gasoline inventories dropped by 898,000 barrels last week, crude inventories declined by 817,000 barrels while distillates saw an increase of 2.8 million barrels. Those inventory stats help explain the early increases for RBOB and WTI while ULSD is trading lower. The DOE’s weekly report is due out at its normal time this morning.
A severe storm on the Black Sea is disrupting roughly 2% of the world’s daily oil output and is getting some credit for the bounce in futures, although early reports suggest that this will be a short-lived event.
Chevron reported that its Richmond CA refinery was back online after a power outage Monday night. San Francisco spot diesel basis values rallied more than a dime Tuesday after a big drop on Monday following the news of that refinery being knocked offline.
Just a few days after Scotland’s only refinery announced it would close in 2025, Exxon touted its newest refinery expansion project in the UK Tuesday, with a video detailing how it was ramping up diesel production to reduce imports and possibly allow for SAF production down the road at its Fawley facility.
Ethanol prices continue to slump this week, reaching a 2-year low despite the bounce in gasoline prices as corn values dropped to a 3-year low, and the White House appears to be delaying efforts to shift to E15 in an election year.
Click here to download a PDF of today's TACenergy Market Talk.
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.