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Expectations For Oil Output Cuts Outweigh Fears of Fallout

Tuesday, Jun 2 2020
Market Talk

Energy futures have reached their highest levels since the start of the stay-at-home orders 2.5 months ago as expectations for oil output cuts, and concerns about a tropical storm seemed to be temporarily outweighing fears of economic fallout from continued rioting around the country.

Less than three months after the “Oil Price War” between Saudi Arabia and Russia started, it looks like the two are ready to agree to a new deal this week, that would extend the OPEC & Friends production cuts ahead of schedule. WTI is the first of the major energy futures contracts to trade into the gap left behind by the opening shots of that price war, and Brent is just a few cents behind, adding some more bullish technical signals on top of the fundamental optimism.

There will be a tropical storm in the Gulf of Mexico this weekend according to the latest forecasts from the National Hurricane Center. This is already the third named storm of the season that’s only officially 1.5 days old and so far making good on the predictions for a very busy year.

D6 (ethanol) RIN values surged to a fresh two year high Monday, as the EPA continues to give minimal guidance on the moving target of small refinery waivers to the RFS. D4 values are also rallying, but not keeping pace with the ethanol values as a statutory blend wall in 2021 looks likely which may force more bio and renewable diesel blending to make up for the short fall. Right on cue, Holly announced that it would convert its small refinery in Cheyenne, WY into a renewable diesel production facility.

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

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