French Refinery Restarts Apply Mild Selling Pressure

Market TalkTuesday, Apr 11 2023
Pivotal Week For Price Action

Refined products are seeing modest selling pressure to start Tuesday’s session, while oil prices are holding near break-even levels, as French refineries restart operations after a month of disruptions.

Total said operations were resuming at all 4 of its French refineries, as workers are returning after a month-long strike, while Exxon reported facilities restarting late last week, which appears to be putting downward pressure on futures as the facilities that often supplement US supplies on the East Coast are looking like they’ll be ready for the driving season. There is another nationwide strike planned on Thursday however, so the ongoing saga of people not wanting to work 2 more years will drag on for a while longer.

Money managers have seen a drastic reduction in bets on lower oil prices in the wake of OPEC’s surprise announcement to cut its production target 2 weeks ago, with short positions in WTI and Brent cut in half last week. Large speculators also added long positions during the week, but the net length held remains modest compared to historical levels. Open interest for crude oil contracts has recovered from last year’s big drop when volatility made contracts too hot to handle for many traders, and Brent is seeing more of an uptick than WTI as the new inclusion of US crude into the mix is clearly drawing in new funds. Refined products have also seen a tick higher in open interest but are still noticeably lower today than they were before the war.

Baker Hughes reported a decline of 2 oil rigs and 2 natural gas rigs actively drilling in the US last week. The Total US oil rig count is back to 590, which matches a 9-month low.

While futures continue to be soft, markets across the southwestern US remain extremely tight, with rack prices holding $1/gallon or more over spot markets in New Mexico and Arizona, with Nevada and West Texas markets not far behind.  

The EIA will publish its short-term Energy outlook later this morning, followed by OPEC’s monthly report on Thursday and the IEA’s monthly report Friday. The EIA is slowly incorporating renewable diesel into its reporting, publishing an estimate for RD consumption in the US, that shows essentially all of the fuel was used in California in 2021 since it was worth roughly $1.50/gallon more there than just about any place else thanks to the LCFS and Cap & Trade programs.  

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Market Talk Update 04.11.2023

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Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Nov 29 2023

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. 

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Pivotal Week For Price Action
Market TalkTuesday, Nov 28 2023

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.