FED Signals That Days Of Money Printing May Eventually End

Market TalkFriday, Jun 18 2021
Pivotal Week For Price Action

A big rally in the US Dollar after the FED signaled that the days of money printing may eventually end has become the big story this week that has sent a wave of “Risk Off” selling pressure across numerous markets.  The selling this week sets up a pivotal test for energy futures in the back half of the month.  If they can hold on around current levels and find a bid, the longer term upward trends are still intact, but if they drop another couple percent from here that opens the door on the charts for a 20-30 cent drop for products this summer.

Commodities in general have been under heavy selling pressure this week, with several wiping out their entire 2021 gains as supply chains start to catch up to the rapid swings in demand.  While crude oil has managed to buck that trend so far, WTI is now giving up its gains for the week and may struggle to resist the pull of refined products and other commodities if the dollar rally continues.   The selloff in corn & soybeans has added to the downward pressure in RINs that wiped out a third of their value in just 4 days.  We did see values reach a temporary floor in Thursday’s session, but sellers moved offers lower in the afternoon suggesting the move lower may not yet be done.

It was a Reuters report that kicked off the huge sell-off in RINs one week ago, and a new report highlights the large obligations refiners have outstanding as of their Q1 earnings filings.  While this week’s sell-off no doubt has many refiners breathing a little easier as Renewable Volume Obligation (RVO) values dropped to $.16/gallon of transportation fuel produced from $.23, prices are only back to where they ended the 1st quarter, so from a value standpoint, those refiners are no better off now than they were as of those reports.    

Tropical Storm Claudette is expected to be named later today before making landfall in Louisiana overnight.  The storm’s current path suggests it won’t make a direct hit to any of the numerous refineries in the area, but will dump heavy rains on an area that’s already been saturated this year, and is plenty weary of hurricanes from the parade of storms that hit them last year. 

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

Market Update (01A) 6.18.21

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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.