Gasoline Futures Reached A Fresh 6-Month High Overnight
Gasoline futures reached a fresh 6-month high overnight as the spring rally towards $3 continues heading into the holiday weekend.
Wednesday’s session saw healthy buying for refined products, after the DOE’s weekly report showed improving demand and tighter supplies. Gasoline days of supply in the US dropped below 24 days based on last week’s DOE estimate, which is below the 5-year seasonal range, and the lowest since October, which also happened to be the last time futures traded at $2.84.
Distillates saw a huge decline in the weekly days of supply estimate, which had been holding near average even though inventories are low since demand in Q1 had been so atrocious. A 14% jump in the weekly demand estimate pushed those values below their seasonal range and to a new 6-month low as well, although traders continue to act more skeptical on ULSD than they do on RBOB, which is not unusual for springtime. The biggest question for diesel is whether or not that jump in the demand estimate was a 1-week anomaly (which are common in the DOE’s data) or if it’s a sign that the slowdown may finally be coming to an end.
Good Friday is one of only 3 holidays a year where the CME completely shuts down trading for the day, vs US-centric holidays like Memorial Day and 4th of July where trading occurs in abbreviated sessions. The NYSE is also closed tomorrow, but it is not a federal holiday so the March payroll report will be released and we won’t know the market reaction until futures trading reopens Sunday night.
Yesterday we saw the ADP payroll report come in well below February levels and below many forecasts. That surprise makes tomorrow’s jobs report potentially more newsworthy since labor markets have been surprisingly resilient up until now and many will look to the BLS for confirmation of the private figures. If that bad news for jobs is confirmed, it could be seen as good news for Wall Street, who simply can’t seem to give up on the idea that the FED is ready to cut interest rates, even though they keep saying they’re not.
Valero has added a new 55mb/day coker at its Port Arthur TX refinery, which will increase its overall capacity for finished products at the facility. You won’t see that new capacity in the EIA’s data since this week (they still haven’t shown the new Exxon Beaumont 250mb/day that’s been online for a month) and you won’t see it in run rates just yet since a fire at the refinery last weekend has shut other units and kept the plant from reaching full rates.
Crude oil inventories saw another decline last week as a recovery in exports and a decline in the adjustment factor offset a jump in imports and another small release from the SPR. Crude oil production (which is still net of the adjustment factor for now) continued to hold steady just above 12 million barrels/day.
The EIA this morning highlighted the new addition of WTI in Midland TX in the Brent crude oil price basket. Don’t confuse that with WTI in Cushing, which is the NYMEX delivery point.
Nationwide protests continue in France, which has taken an estimated 1 million barrels/day of refinery output offline over the past couple of weeks. Despite the ongoing disruptions, it appears Exxon has figured out a way to restart operations at its Port Jerome refinery, which may bring roughly a quarter of the total lost output back online if it can reach full rates. It’s still unclear if this means that other plants will be able to restart as well. Those operations will become more important as we approach the driving season, and the US East Coast will want to lean on European gasoline imports to meet demand.
We’re approaching the 5-year anniversary of the Husky refinery in Superior Wisconsin exploding and forcing most of that town to be evacuated. That rebuilt facility, with new ownership hoping to avoid the stigma Husky had earned after blowing up multiple refineries, is scheduled to come back online this summer.
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Week 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
After Another Black Friday Selloff Pushed Energy Futures Sharply Lower In Last Week’s Holiday-Shortened Trading
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View AllWeek 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.
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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.