Gasoline Futures Slide as Market Faces Potential Test of Support Levels

Market TalkMonday, Jun 12 2023
Pivotal Week For Price Action

Gasoline futures are leading the energy complex lower to start the week with the July RBOB contract off 6 cents in the early going, while US equity markets point modestly higher.  Gasoline prices are now down 15 cents from the high trade set last Thursday and looks like it could now be poised for a test of the $2.40 range if we don’t see a bounce soon.

Money managers were acting bullish on everything besides gasoline last week, increasing long positions and cutting shorts for WTI, Brent, ULSD, and Gasoil. The large speculators seem to be betting the gasoline rally is done for the year however as they added new shorts and cut old longs last week while the open interest in RBOB contracts surged to a 16-month high.

The FED will make its next policy announcement Wednesday, and the CME’s Fedwatch tool shows a 74% chance that the committee holds rates steady, while 26% of bettors think they’ll continue their streak of increased rates. Tomorrow’s CPI report could be pivotal to their decision making, or perhaps to the market’s expectations for that announcement.

Baker Hughes reported an increase of 1 oil rig drilling in the US last week, marking the first move higher in the rig count since Mid-April, and snapping a 5-week decline that’s seen 45 rigs taken offline. Don’t get too excited about a sudden turnaround in drilling activity though, natural gas rigs dropped by 2 last week, reaching a new 15 month low.

A gasoline tanker caught fire over the weekend and caused a portion of interstate 95 to collapse in Philadelphia, which will snarl traffic in the area for months. Reports say the driver of that truck was still missing as of this morning, and the cause of the fire is still unknown. 

Today’s interesting read from Reuters on regulatory arbitrage and the feedstock wars:  Why US subsidies are threatening Canada’s clean fuel program. This phenomenon is also why some people think Irving oil is considering (or threatening) selling its 99-year-old refining business

The DOE continues to pat itself on the back for operating the SPR, announcing a successful purchase of 3 million barrels in May, and planning another 3 million barrels in September in “a Good Deal for American Taxpayers”. If the DOE continues replenishing at its current pace of roughly 1 million barrels/month, it will take approximately 23 years to return to the levels we had in storage two years ago.

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

Market Talk Update 06.12.2023

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Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

The 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.

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

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.

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