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, 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.