Gasoline Prices Continue To March To Fresh Record Highs This Week

Market TalkFriday, Jun 3 2022
Pivotal Week For Price Action

Gasoline prices continue to march to fresh record highs this week as the world got a harsh reminder Thursday that OPEC can’t replace Russian exports, and US inventories continue to slide. RBOB gasoline futures smashed their previous record in Thursday’s session, then broke it again by 3 cents overnight, with essentially nothing on the charts standing in the way of an extended move higher.  

While diesel prices are still well-below the chaotic records set back in March and April, they are now within striking distance of the $4.40 chart gap, with little technically standing in the way of a push to that next layer of resistance.  If diesel prices do move into that range however, there’s a potential head and shoulders forming on the charts with March’s rally to $4.67 creating the left shoulder and April’s spike north of $5.85 as the head. That pattern could ultimately mark the end of the bull market in ULSD, but it still could take months before that plays out, IF it happens at all.

OPEC announced it would accelerate its output restoration to pre-COVID levels, which did bring about a brief round of selling, only to see those losses turn to gains when multiple reports reminded people that this was in no way a replacement of the Russian barrels that are lost or redirected by sanctions. 

RIN prices saw a big rally Thursday following another rumor report that the EPA would increase the 2021 renewable volume mandates, rather than easing them to help lower fuel prices as had been rumored over the past few weeks.  The agency is under a court order to release its long overdue blending requirements for 2020-2022 later today.  

The DOE’s weekly report showed a large draw in crude oil inventories despite the ongoing SPR release, and refiners struggling to keep up with the product demand both domestically and abroad. Refinery hiccups continue to hamper the efforts, with the system stretched tighter than it’s been in decades with so much capacity taken offline in the past 2 years. The one notable exception in refinery activity is seen in PADD 1 where the plants that had been knocking on death’s door for years have now been able to increase run rates for 5 straight weeks to their highest levels since the start of the pandemic. 

Tropical Storm Alex is expected to be named later today, but fortunately is steering far south of the Gulf Coast refining network as it heads towards Florida. The other good news with this storm is that it’s moving forward quickly which should minimize the impacts on land.

The May payroll report showed an estimated increase of 390,000 jobs in the US last month, while the headline unemployment rate held steady at 3.6% and the U-6 rate ticked up to 7.1%.  

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Market Talk Update 6.03.22

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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.