Gasoline And Diesel Contracts Trying To Lead Energy Complex Higher
Gasoline and diesel contracts are trying to lead the rest of the energy complex higher to start the first full day of trading of this holiday-shortened week. The follow through after Friday’s bounce has taken back about 40% of the losses we saw in the past week.
The early strength in refined products makes it seem like there may have been a refinery hiccup over the long weekend, although so far no reports of issues are coming to light. The Midwest continues to see basis values rally, with Group 3 UNL trading 20 cents higher than a week ago after storms knocked at least 2 refineries in Oklahoma offline last week. Products could be finding some more strength from reports that several European refineries have been forced to reduce their run rates due to the ongoing saga of contaminated crude coming out of Russia.
Speaking of refiners, an article over the weekend noted how the global shortage of heavy crudes is hampering margins for many refiners this year, while a WSJ report this morning shows that expectations for an earnings boost at year end due to the IMO spec change remain high.
Baker Hughes reported a net decrease of 5 oil rigs working in the US last week, with the Permian basin declining by 3 rigs, while the DJ Niobrara declined by 2.
Money managers were reducing their net-long holdings in most energy contracts before the big selling started last week, with WTI seeing a 4th straight weekly decline, while Brent had its 2nd, although none of the changes were large enough to suggest any sort of mass exodus was underway. Given the resilience in prices since Thursday’s collapse, it seems that the large funds have weathered another storm.
The EIA this morning takes a look at the importance of energy trade between the US & Canada, with our neighbors to the north accounting for nearly half of all US oil imports.
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Week 48 - US DOE Inventory Recap
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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.