Four Day Streak Of Fresh Highs

Market TalkFriday, Feb 26 2021
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A wave of selling gripped energy markets overnight, snapping a four day streak of fresh highs, but not yet breaking the upward sloping trend-lines that have helped the rally in energy prices near 90% over the past four months. The big question of the day is whether or not the buyers will step in, as they have numerous times during previous pullbacks. 

It’s the last trading day for March RBOB and ULSD futures, so watch the April contracts for price direction today in those markets that haven’t already rolled. You’ll see RBOB futures prices “up” about 8-9 cents when the April contract takes the prompt position next week as the spec changes from Winter grade to Summer grade. Note that spread is around half as large as it has been in years past, thanks in large part to the EPA’s RBOB specification streamlining rules put into place last year, and the current tight supply situation for prompt barrels due to the rash of refinery shutdowns.

Group 3 ULSD is taking on the role of the most interesting basis market in the country this week, an unusual position for the normally sleepy Midwestern market that tends to be much less volatile than the neighboring Chicago market. Diesel deliveries have plummeted thanks to a handful of refinery shutdowns in the region and the temporary shutdown of Explorer pipeline last week, and now the draw to pull barrels into Texas.  Basis values have reached the highest in more than three years, as regional supplies on a days of supply basis have dropped to their lowest levels in five years. 

Big changes in the “other” Americas.  Brazil’s Petrobras is going through a major leadership overhaul, and Mexico looks like it’s going the opposite of green as reports suggest it will increase coal production, and allow refineries that have struggled to meet new tighter fuel specs to continue operating and sell off-spec products. 

News that the U.S. struck Iranian-backed militia in Syria didn’t seem to concern markets in the slightest this week, a sign of the excess capacity sitting on the sidelines in the Middle East acting as a price buffer for markets. 

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

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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.