Gasoline Futures Have Dropped More Than 20 Cents Since Reaching A Record High Monday Morning

Market TalkTuesday, Jun 7 2022
Pivotal Week For Price Action

Gasoline futures have dropped more than 20 cents since reaching a record high Monday morning. While a 20 cent swing used to be a big deal, these days it’s less than a 5% move, and barely raises an eyebrow unless it happens in a couple of minutes rather than a couple of days. 

There are signs across the country this past week that demand may be tapering off – some of which is no doubt caused by high prices -  but it’s too soon to know whether this is just a normal holiday hangover for demand, or if staycations here to stay.

Despite the sharp pullback this week, gasoline prices remain comfortably above their bullish trend lines for the time being, and we won’t get too excited about a potential end of the rally until we see that support – some 30 cents below current values – finally break down. 

ULSD meanwhile filled the chart gap at $4.40 that was left behind by the May contract’s record smashing backwardation, which could actually spark some short term profit taking now that that target has been fulfilled. There’s still a chance that we are about 2/3 of the way into a major head and shoulder reversal pattern that could eventually see diesel prices drop by $1/gallon or more this fall, but for now ULSD charts are also comfortably pointing higher even though they’re in the red this morning, leaving the door open for a run at the March high of $4.67.

Perfect timing:While the US may never build a new petroleum refinery again, Kuwait and Saudi Arabia are ramping up operations at two new large facilities just in time to earn record setting margins as the world struggles with a shortage of capacity

A major factor in the global supply/demand (im)balance over the coming weeks will be how Chinese demand bounces back with 50 million people let out of lockdown, and perhaps more directly how Chinese refiners can respond after many had to drastically cut runs due to the plunge in demand. Just-released export quotas remain well below 2021 levels, but are increased somewhat which should help alleviate current inventory overhangs, and encourage those plants to start ramping up operations again once they clear the tanks.

Click here to download a PDF of today's TACenergy Market Talk.

Market Talk Update 6.07.2022

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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.