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, 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.