Gasoline Eases, Managers Stay Bullish on Diesel

Market TalkMonday, Aug 14 2023
Pivotal Week For Price Action

Gasoline prices are leading the energy complex lower to start the week, threatening to break the bullish trend lines that have been pushing prices higher since the 4th of July. 

We’re seeing some potentially pivotal short term support levels tested in early trading this morning.  The $3.09 range that was a temporary ceiling (aka resistance) for ULSD now looks like it might be the floor (support) near term.   If prices can hold above that level, the flag pattern established after the 11-day winning streak will still be in play, keeping the door open for a run at $3.50.  If we see that level break and hold however, we could soon see prices drop back below $3. 

Money managers are still bullish on diesel prices, increasing net length for both ULSD and Gasoil contracts again last week, continuing to bet that prices can keep climbing after 7 straight weeks of gains.   The big funds look like they may have thrown in the towel on RBOB prices however with new shorts being added and a healthy amount of long liquidations last week.  If those funds continue to liquidate, we could see a snowball effect on gasoline prices heading lower, particularly if RBOB fails to hold above the $2.90 range this morning.

Baker Hughes reported that the US oil rig count held steady last week, snapping an 8-week slide, but the natural gas rig count dropped by 5 to reach its lowest level since February 2022.  

There were several refinery hiccups reported to the TCEQ over the weekend, which so far don’t look like they’ll be major factors in the market this week.

Marathon reported yet another leak at its Galveston Bay refinery Friday, after announcing it would take months to fully repair operations at the facility after the deadly fire in May.

Delek reported another upset at its Big Spring facility that is usually good for a flaring event every couple of weeks.

A facility you’ve probably never heard of known as the gas to gasoline plant in Beaumont was shut down yesterday after a valve failed.  That facility is part of a project aimed at ultimately producing renewable gasoline after converting waste biomass to methanol, but earlier reports on the facility suggest it won’t be making any finished gasoline until next year.

After a quiet few weeks for tropical activity in the Atlantic basin, the NHC is tracking 2 potential systems this morning, although both are given low (20%) odds of being named.

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Market Talk Upadate 8.14.23

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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.