Fear Takes Control After Months Of Hope-Fueled Trading

Market TalkTuesday, Mar 23 2021
Pivotal Week For Price Action

After months of hope-fueled trading, fear seems to be taking back control of the price action as equity and energy markets both face selling pressure this morning sparked by new COVID outbreaks and their accompanying lockdowns

The charts look treacherous for petroleum contracts, with a drop to the $52 range for WTI – which would mean another 15-20 cents of downside for refined products – looking likely if prices settle below last week’s low trades.  

The irony of this sell-off is it’s coming at a time when supplies for the Atlantic coast, which is home to the Nymex delivery hub for RBOB and ULSD futures contracts, is facing multiple supply disruptions from unrelated pipeline issues. Buckeye’s line in New York still remains down after last week’s spill, and Colonial’s line into New Jersey is running at reduced rates due to a lack of push stock from the Gulf Coast, causing premiums for offline barrels in the region to soar. 

After a big selloff last week, RIN prices made a strong recovery Monday rallying by nearly 10 cents for both D6 and D4 values. That bounce means the trend that’s added more than $1/RIN since August is still alive and well.  That said, RINs will face a big test today as the drop in petroleum prices will tend to put downward pressure on those values as the relative value for imports and exports will change with the spread between products. 

Oil industry executives joined a virtual meeting with the President Monday and supported an plan to put a price on carbon emissions as a way to combat climate change. There’s still no clear plan for what that might look like, but a priority for the industry is to push towards a unified market, rather than the segmented requirements that are popping up now around the world. Speaking of which, the fledgling RGGI program attempting to band North East States together in a climate pact to reduce emissions from the power sector saw prices for its CO2 credits reach a new high in March according to a new EIA report.

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Pivotal Week For Price Action
Market TalkWednesday, Jun 7 2023

Energy Prices Fluctuate: Chinese Imports Surge, Saudi Arabia Cuts Output and Buys Golf

Energy prices continue their back-and-forth trading, starting Wednesday’s session with modest gains, after a round of selling Tuesday wiped out the Saudi output cut bounce. 

A surge in China’s imports of crude oil and natural gas seem to be the catalyst for the early move higher, even though weak export activity from the world’s largest fuel buyer suggests the global economy is still struggling. 

New tactic?  Saudi Arabia’s plan to voluntarily cut oil production by another 1 million barrels/day failed to sustain a rally in oil prices to start the week, so they bought the PGA tour

The EIA’s monthly Short Term Energy Outlook raised its price forecast for oil, citing the Saudi cuts, and OPEC’s commitment to extend current production restrictions through 2024. The increase in prices comes despite reducing the forecast for US fuel consumption, as GDP growth projections continue to decline from previous estimates. 

The report included a special article on diesel consumption, and its changing relationship with economic activity that does a good job of explaining why diesel prices are $2/gallon cheaper today than they were a year ago.   

The API reported healthy builds in refined product inventories last week, with distillates up 4.5 million barrels while gasoline stocks were up 2.4 million barrels in the wake of Memorial Day. Crude inventories declined by 1.7 million barrels on the week. The DOE’s weekly report is due out at its normal time this morning. 

We’re still waiting on the EPA’s final ruling on the Renewable Fuel Standard for the next few years, which is due a week from today, but another Reuters article suggests that eRINs will not be included in this round of making up the rules.

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

Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkTuesday, Jun 6 2023

Energy Prices Retreat, Global Demand Concerns Loom

So much for that rally. Energy prices have given back all of the gains made following Saudi Arabia’s announcement that it would voluntarily withhold another 1 million barrels/day of oil production starting in July. The pullback appears to be rooted in the ongoing concerns over global demand after a soft PMI report for May while markets start to focus on what the FED will do at its FOMC meeting next week.

The lack of follow through to the upside leaves petroleum futures stuck in neutral technical territory, and since the top end of the recent trading range didn’t break, it seems likely we could see another test of the lower end of the range in the near future.  

RIN prices have dropped sharply in the past few sessions, with traders apparently not waiting on the EPA’s final RFS ruling – due in a week – to liquidate positions. D6 values dropped to their lowest levels in a year Monday, while D4 values hit a 15-month low. In unrelated news, the DOE’s attempt to turn seaweed into biofuels has run into a whale problem.  

Valero reported a process leak at its Three Rivers TX refinery that lasted a fully 24 hours.  That’s the latest in a string of upsets for south Texas refineries over the past month that have kept supplies from San Antonio, Austin and DFW tighter than normal. Citgo Corpus Christi also reported an upset over the weekend at a sulfur recovery unit. Several Corpus facilities have been reporting issues since widespread power outages knocked all of the local plants offline last month.  

Meanwhile, the Marathon Galveston Bay (FKA Texas City) refinery had another issue over the weekend as an oil movement line was found to be leaking underground but does not appear to have impacted refining operations at the facility. Gulf Coast traders don’t seem concerned by any of the latest refinery issues, with basis values holding steady to start the week.

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