Gasoline Prices Are Trying To Stage A Recovery This Morning After The 4th Biggest Daily Price Drop On Record

Market TalkWednesday, Jul 6 2022
Pivotal Week For Price Action

Gasoline prices are trying to stage a recovery this morning after the 4th biggest daily price drop on record, and the largest since the early days of Russia’s invasion of Ukraine 4 months ago. Oil prices are also seeing a modest recovery this morning, following news that Russian ordered one of the world’s largest crude oil pipelines be closed, while diesel prices continue to slide lower.  

That Russian court appears to have taken a page out of the Keystone XL prevention playbook, ordering the pipeline be shut-down due to “documentary irregularities” on how to prevent oil spills, rather than a political stunt, retaliation for sanctions or to try and drive prices higher. We’ll have to wait and see if Putin later regrets this decision and asks oil companies to produce more in an effort to lower prices in another year or two.

Gasoline futures have dropped $1/gallon from their high set on June 10th, while some cash markets have fallen more than $1.20/gallon during that span. That drop is already bringing relief to consumers as they trickle down to the pump, while retailers should enjoy some record margins on the way down, unless of course we get another big bounce in the next few days. Keep in mind that in an average year we’d expect to see about a 30% pullback in gasoline prices from their spring price peak, which this year would bring RBOB down about another 30 cents/gallon from current levels, which is awfully close to the $3 mark. 

Yesterday’s update highlighted the chance that ULSD would slide to $3.50 if support at $3.81 broke, but I wasn’t expecting that it would happen in a single day. The $3.50 range now becomes a more serious support layer that needs to hold in order to prevent a slide to $3. 

Renewable fuels have been caught up in the recession-fear selling as well, with both ethanol and biodiesel prices reaching 3 month lows yesterday as grain prices got hammered along with energy commodities.  

For those looking for a reason for prices to bounce after Tuesday’s technical breakdown, just look to equity markets that staged a big intra-day reversal, with several major US indices finishing Tuesday’s session with gains after heavy morning losses. There’s also that issue of the world being woefully short on things like diesel fuel and natural gas that the fears of slowdown haven’t fixed. 

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Market Talk Update 7.6.22

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Pivotal Week For Price Action
Market TalkThursday, Mar 28 2024

Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

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, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

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