Gasoline Futures Hit 9-Month Highs, WTI Eyes $80

Market TalkTuesday, Jul 25 2023
Pivotal Week For Price Action

Refinery upsets and optimistic equity markets sent gasoline prices soaring Monday, while ULSD and WTI had a much more tempered outlook. RBOB gasoline futures surged by more than 12 cents to touch a new 9 month high before giving back more than half of those gains since topping out early yesterday afternoon. While WTI was left in gasoline’s wake yesterday, it did manage to settle above its 200 day moving average which leaves the door open to a push north of $80 in the near term.

A reported FCC shutdown at Exxon Baton Rouge set to last weeks, which could erase more than a million barrels of gasoline output, took much of the credit for gasoline prices far outpacing the rest of the complex Monday. In addition, Marathon’s Texas City (aka Galveston Bay) facility had yet another upset over the weekend, marking at least a half dozen events since a fatal fire 2 months ago.  

Despite the big moves in futures, physical traders seemed unimpressed with USGC basis values little changed on the day. West Coast basis values on the other hand rallied after the roll to August pipeline cycles, pushing cash gasoline prices up by more than 16 cents on the day following yet another reported upset at an LA-area refinery. 

The EIA published its annual refinery capacity report Friday, noting the first increase in US refining capability since 2019, even though the report still does not include Exxon’s 250mb/day expansion in Beaumont or smaller additions from Valero Pt Arthur or Marathon Galveston Bay that occurred this year. The increase in the past year was all due to PBF Paulsboro bringing shuttered units back online in 2022 as East Coast refiners went from worst to first due to the fallout from the Russian invasion of Ukraine. Good news for those who don’t enjoy reading, the EIA is now publishing these notes on YouTube, despite the ongoing writers’ strike

After the Atlantic’s first hurricane of the season came and went over open water this past week, the NHC is tracking 2 more potential storm systems. One is targeting the east coast of Florida, Georgia and South Carolina while the other makes its way into Caribbean, but both are given just 20% odds of developing over the next 7 days. 

An EIA note last week took a closer look at the impact on tropical systems on Gulf Coast oil production and refining, forecasting a peak impact of a storm shutting in 80% of GOM oil output, and taking 8% of the country’s refining output offline for a month. This Reuters note details how refinery issues not caused by hurricanes have kept diesel inventories across the US low (outside of the West Coast where Renewable Diesel inventories don’t show up in official numbers yet) and making the system more susceptible to a price shock should a storm hit.

Pretty much everyone Is betting the FED will raise their target interest rate by 25 points tomorrow, with the CME’s Fedwatch tool showing a 99% probability of that outcome, while 1% thinks the FED may raise by 50 points. It’s worth noting that a month ago 28% of bets were placed on the FED holding rates steady at this meeting, and yet equities have rallied in the face of tighter monetary policy, in another sign of shifting expectations from economists that tend to predict 5 out of every 2 recessions.

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

Market Talk Update 07.25.2023

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Pivotal Week For Price Action
Market TalkFriday, Apr 19 2024

Gasoline Futures Are Leading The Way Lower This Morning

It was a volatile night for markets around the world as Israel reportedly launched a direct strike against Iran. Many global markets, from equities to currencies to commodities saw big swings as traders initially braced for the worst, then reversed course rapidly once Iran indicated that it was not planning to retaliate. Refined products spiked following the initial reports, with ULSD futures up 11 cents and RBOB up 7 at their highest, only to reverse to losses this morning. Equities saw similar moves in reverse overnight as a flight to safety trade soon gave way to a sigh of relief recovery.

Gasoline futures are leading the way lower this morning, adding to the argument that we may have seen the spring peak in prices a week ago, unless some actual disruption pops up in the coming weeks. The longer term up-trend is still intact and sets a near-term target to the downside roughly 9 cents below current values. ULSD meanwhile is just a nickel away from setting new lows for the year, which would open up a technical trap door for prices to slide another 30 cents as we move towards summer.

A Reuters report this morning suggests that the EPA is ready to announce another temporary waiver of smog-prevention rules that will allow E15 sales this summer as political winds continue to prove stronger than any legitimate environmental agenda. RIN prices had stabilized around 45 cents/RIN for D4 and D6 credits this week and are already trading a penny lower following this report.

Delek’s Big Spring refinery reported maintenance on an FCC unit that would require 3 days of work. That facility, along with several others across TX, have had numerous issues ever since the deep freeze events in 2021 and 2024 did widespread damage. Meanwhile, overnight storms across the Midwest caused at least one terminal to be knocked offline in the St. Louis area, but so far no refinery upsets have been reported.

Meanwhile, in Russia: Refiners are apparently installing anti-drone nets to protect their facilities since apparently their sling shots stopped working.

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

Pivotal Week For Price Action
Market TalkThursday, Apr 18 2024

The Sell-Off Continues In Energy Markets, RBOB Gasoline Futures Are Now Down Nearly 13 Cents In The Past Two Days

The sell-off continues in energy markets. RBOB gasoline futures are now down nearly 13 cents in the past two days, and have fallen 16 cents from a week ago, leading to questions about whether or not we’ve seen the seasonal peak in gasoline prices. ULSD futures are also coming under heavy selling pressure, dropping 15 cents so far this week and are trading at their lowest level since January 3rd.

The drop on the weekly chart certainly takes away the upside momentum for gasoline that still favored a run at the $3 mark just a few days ago, but the longer term up-trend that helped propel a 90-cent increase since mid-December is still intact as long as prices stay above the $2.60 mark for the next week. If diesel prices break below $2.50 there’s a strong possibility that we see another 30 cent price drop in the next couple of weeks.

An unwind of long positions after Iran’s attack on Israel was swatted out of the sky without further escalation (so far anyway) and reports that Russia is resuming refinery runs, both seeming to be contributing factors to the sharp pullback in prices.

Along with the uncertainty about where the next attacks may or may not occur, and if they will have any meaningful impact on supply, come no shortage of rumors about potential SPR releases or how OPEC might respond to the crisis. The only thing that’s certain at this point, is that there’s much more spare capacity for both oil production and refining now than there was 2 years ago, which seems to be helping keep a lid on prices despite so much tension.

In addition, for those that remember the chaos in oil markets 50 years ago sparked by similar events in and around Israel, read this note from the NY Times on why things are different this time around.

The DOE’s weekly status report was largely ignored in the midst of the big sell-off Wednesday, with few noteworthy items in the report.

Diesel demand did see a strong recovery from last week’s throwaway figure that proves the vulnerability of the weekly estimates, particularly the week after a holiday, but that did nothing to slow the sell-off in ULSD futures.

Perhaps the biggest next of the week was that the agency made its seasonal changes to nameplate refining capacity as facilities emerged from their spring maintenance.

PADD 2 saw an increase of 36mb/day, and PADD 3 increased by 72mb/day, both of which set new records for regional capacity. PADD 5 meanwhile continued its slow-motion decline, losing another 30mb/day of capacity as California’s war of attrition against the industry continues. It’s worth noting that given the glacial pace of EIA reporting on the topic, we’re unlikely to see the impact of Rodeo’s conversion in the official numbers until next year.

Speaking of which, if you believe the PADD 5 diesel chart below that suggests the region is running out of the fuel, when in fact there’s an excess in most local markets, you haven’t been paying attention. Gasoline inventories on the West Coast however do appear consistent with reality as less refining output and a lack of resupply options both continue to create headaches for suppliers.

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