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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Market TalkFriday, Jul 19 2024

Summertime-Friday-Apathy Trade Influencing Energy Markets

Energy markets are treading water to start the day as the Summertime-Friday-Apathy trade seems to be influencing markets around the world in the early going. RBOB futures are trying for a 3rd straight day of gains to wipe out the losses we saw to start the week, while ULSD futures continue to look like the weak link, trading lower for a 2nd day and down nearly 3 cents for the week.

Bad to worse: Exxon’s Joliet refinery remains offline with reports that repairs may take through the end of the month. On top of that long delay in restoring power to the facility, ENT reported this morning that the facility has leaked hydrogen fluoride acid gas, which is a dangerous and controversial chemical used in alkylation units. Chicago basis values continue to rally because of the extended downtime, with RBOB differentials approaching a 50-cent premium to futures, which sets wholesale prices just below the $3 mark, while ULSD has gone from the weakest in the country a month ago to the strongest today. In a sign of how soft the diesel market is over most of the US, however, the premium commanded in a distressed market is still only 2 cents above prompt futures.

The 135mb Calcasieu Refinery near Lake Charles LA has been taken offline this morning after a nearby power substation went out, and early reports suggest repairs will take about a week. There is no word yet if that power substation issue has any impacts on the nearby Citgo Lake Charles or P66 Westlake refineries.

Two tanker ships collided and caught fire off the coast of Singapore this morning. One ship was a VLCC which is the largest tanker in the world capable of carrying around 2 million barrels. The other was a smaller ship carrying “only” 300,000 barrels (roughly 12 million gallons) of naphtha. The area is known for vessels in the “dark fleet” swapping products offshore to avoid sanctions, so a collision isn’t too surprising as the vessels regularly come alongside one another, and this shouldn’t disrupt other ships from transiting the area.

That’s (not) a surprise: European auditors have determined the bloc’s green hydrogen goals are unattainable despite billions of dollars of investment, and are based on “political will” rather than analysis. Also (not) surprising, the ambitious plans to build a “next-gen” hydrogen-powered refinery near Tulsa have been delayed.

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Market TalkThursday, Jul 18 2024

Refined Products Stanch Bleeding Despite Inventory Builds And Demand Slump

Refined products are trading slightly lower to start Thursday after they stopped the bleeding in Wednesday’s session, bouncing more than 2 cents on the day for both RBOB and ULSD, despite healthy inventory builds reported by the DOE along with a large slump in gasoline demand.

Refinery runs are still above average across the board but were pulled in PADD 3 due to the short-term impacts of Beryl. The Gulf Coast region is still outpacing the previous two years and sitting at the top end of its 5-year range as refiners in the region play an interesting game of chicken with margins, betting that someone else’s facility will end up being forced to cut rates before theirs.

Speaking of which, Exxon Joliet was reportedly still offline for a 3rd straight day following weekend thunderstorms that disrupted power to the area. Chicago RBOB basis jumped by another dime during Wednesday’s session as a result of that downtime. Still, that move is fairly pedestrian (so far) in comparison to some of the wild swings we’ve come to expect from the Windy City. IIR via Reuters reports that the facility will be offline for a week.

LA CARBOB differentials are moving in the opposite direction meanwhile as some unlucky seller(s) appear to be stuck long and wrong as gasoline stocks in PADD 5 reach their highest level since February, and held above the 5-year seasonal range for a 4th consecutive week. The 30-cent discount to August RBOB marks the biggest discount to futures since 2022.

The EIA Wednesday also highlighted its forecast for rapid growth in “Other” biofuels production like SAF and Renewable Naptha and Propane, as those producers capable of making SAF instead of RD can add an additional $.75/gallon of federal credits when the Clean Fuels Producer’s Credit takes hold next year. The agency doesn’t break out the products between the various “Other” renewable fuels, but the total projected output of 50 mb/day would amount to roughly 2% of total Jet Fuel production if it was all turned to SAF, which of course it won’t as the other products come along for the ride similar to traditional refining processes.

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Pivotal Week For Price Action