FED Signals Interest Rates To Remain The Same
It’s a quiet start to trading a day after crude oil and gasoline contracts shrugged off weaker equity markets and a stronger dollar to post a 5% rally. Inventory draws in crude oil took much of the credit for the rally, although demand estimates showed there is still plenty of work to be done to get consumption back to pre-COVID levels. The FED signaled it wouldn’t raise interest rates for nearly three years in its FOMC announcement, which also earned some credit for the rally in energy prices. Whatever the cause, this week’s bounce has reduced the risk of a near-term technical collapse, with the low prices from June passing their first major test of their chart support capabilities. Longer term there is still plenty of downside risk on the charts unless prices can push through their August highs.
Hurricane Sally made landfall with winds over 100 miles an hour, but like Laura a few weeks ago, spared refiners in the path with a late eastward shift. The plants that had reduced rates ahead of the storm appear to have avoided major damage and terminals in the region quickly reopened even as the system continues to dump huge amounts of rain and create widespread flooding.
Although it doesn’t have a name yet, the largest current storm threat could be the disturbance over the Southwest Gulf of Mexico that’s being given 90% odds of forming over the next five days, and looks like it will head north and east, putting the refining centers once again in the threat zone. Speaking of names, there’s just one name left on the list for 2020, and since that will probably get used up in the next few days, we’ll then move on to the Greek names to finish out the record setting season.
The chorus of concern for diesel continues as the DOE’s weekly demand estimate dropped to its lowest level since May last week, and inventories are once again on the cusp of reaching a record high. Add to that the incremental supply from barrels normally destined for jet fuel production and it appears that diesel may remain the weak link in the refinery chain, after more than a decade of being the primary moneymaker for many.
D4 Bio RINs continue their rally, pushing to $.80/RIN for the first time since March 2018, on the heels of stronger Soybean prices that surpassed $10/bushel for the first time in nearly three years.
Click here to download a PDF of today's TACenergy Market Talk.
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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.