Equity Prices Whipsawed By Stimulus Package Rumors

Market TalkWednesday, Oct 7 2020
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Energy prices are pulling back after a strong two-day rally as Hurricane Delta’s path has made a favorable shift away from most NOLA area refineries, and after the EIA painted a bleak outlook for fuel consumption. Equity prices are getting whipsawed around by stimulus package rumors which is having some trickle-down effect on energy prices as well. 

Hurricane Delta blew up to a Category 4 storm Tuesday, and made landfall on the Yucatan peninsula near Cancun this morning. Forecasts expect the storm will regain Category 4 strength as it moves over the Gulf of Mexico, but its latest tracks have it hitting further west along the Louisiana coast. That shift in path puts more land between the storm and most numerous refineries in its path, and may mean New Orleans will dodge yet another bullet this year, which seems to be contributing to the early pullback in product prices. 

The API reported draws in refined products of one million barrels/distillates and 867k barrels for gasoline, while crude stocks built by nearly one million gallons. The DOE’s weekly report is due out at its normal time this morning. 

The EIA’s monthly Short Term Energy Outlook predicts increased heating demand across the U.S. this year as a colder winter and work-from-home policies will combine to increase heating consumption. Thanks to ample supplies of natural gas, propane and diesel however, the average cost of heating homes is expected to remain similar to last year. The forecast once again reduced global fuel consumption estimates, largely due to the lingering effects of COVID-19.  The report also highlights the challenges faced by refiners, particularly on the distillate side of the barrel, which helps to explain the drastic changes in the industry over the past six months.

One of the first refining casualties of the COVID fallout, the Come By Chance plant in Newfoundland, is once again feeling the pain of this low-margin environment as Irving Oil terminated its deal to purchase the facility this week.  That announcement won’t have an immediate impact on supply as the plant has been idled for some time. 

While refinery shut downs and conversions have become the norm across much of the world, with more expected in the coming months, China apparently hasn’t received the memo as they’re reportedly plowing ahead with construction of four new major plants, with nearly 1.5 million barrels/day of combined capacity, just in time for the world not to need them. 

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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.

Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

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