Gasoline Futures Attempted To Pull Energy Complex Higher
Gasoline futures are attempted to pull the rest of the energy complex higher to start Friday’s trading as a rash of refinery issues have encouraged buyers to push up near-term prices. Diesel futures are still trading in the red however as a quick 50-70 degree warm-up after this week’s record-setting cold snap will end the spike in heating demand. Thursday’s session will be remembered for another large reversal in oil and refined products, after WTI and ULSD briefly hit new highs for the year, showing that the bulls may be lacking conviction to break out of sideways trading range, but most contracts did finish January with healthy gains, snapping a 3 month losing streak.
The list of Midwestern refineries having issues due to extreme cold continued to grow Thursday, with outages reported and/or rumored at Citgo, BP, Marathon, Husky and P66 plants in the region, and strong cash market buying (note the Chicago RBOB basis values in the chart below) suggesting they weren’t the only facilities having problems. The two big questions become 1) was any long term damage done and 2) will consumers even notice given the large numbers of businesses & schools shuttered due to the weather.
Those refinery outages, coupled with the large drop in total US refinery runs the DOE reported for last week, seems to be helping gasoline time & crack spreads find a bid in the past couple of days. With March futures taking the prompt position today, there is now a 20 cent spread between the first and second RBOB contracts as we approach the always-volatile spring RVP transition.
It’s been a busy week of earnings reports for all segments of the energy industry. A few common themes seem to be a continued race to build infrastructure that will support the latest US Oil boom, good – not great – domestic consumption, and plenty of concern about the global economy in 2019.
The January jobs report was released this morning, in which the Bureau of Labor Statistics seems to have given credence to one of Mark Twain’s borrowed phrase about the 3 types of lies. The agency made a huge cut back in December’s estimated job growth from 312k to 222k jobs for the month. The January figure was estimated at 304k jobs, while the official unemployment rate ticked up .01% to 4.0%. If you’re wondering, the bureau didn’t count the hundreds of thousands of Federal employees who were not being paid as unemployed in the official numbers. The U-6 rate, which doesn’t exclude unemployed people the BLS doesn’t classify as unemployed, was up to 8.1% from 7.6% the week prior. Stocks and energy futures seemed to tick up slightly after the report as this bit of good news for January, bad news for December, seems to add to the “Patient Fed” plan that’s encouraged investors since Wednesday’s FOMC announcement.
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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.