Gasoline Eases, Managers Stay Bullish on Diesel
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.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllThe Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.
The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.
We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.
The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.
There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.
As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.
Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.