Gasoline Prices Don’t Look As Bullish On The Charts With Only 3 Trading Days Left, Hurricane Franklin Reached Category 4 Status
Refined product prices came back to earth Monday after the tank fire at the Garyville LA refinery that sent prices soaring on Friday was finally extinguished with reports suggesting that no damage was done to operating units at the refinery.
The 10-cent drop puts ULSD at risk of snapping its record-setting 9 consecutive weeks of gains, even though the trend line that’s seen prices rally nearly $1/gallon during that time is still intact at the moment. If we see a sustained move below $3.20 for ULSD, the charts suggest we could see another 10-20 cents of downside soon as a natural correction of this big rally, but if the $3.20 range support layers hold, the door is still open to rally north of $3.50 as we head into fall.
Gasoline prices meanwhile don’t look nearly as bullish on the charts, and there are only 3 trading days left before the last summer-spec futures contract of the year goes off the board and we start the winter gasoline season. Both the technical and seasonal factors suggest that outside of a major supply disruption, it’s more likely we’ll see RBOB trading at $2.40 soon than it is we’ll see a run at $3.
Idalia is currently a category 1 hurricane and is expected to reach category 3 status before making landfall in Florida’s big bend region overnight. Port Tampa Bay is still at risk of flooding from storm surge which is expected to be 4-7 feet in that area, but the latest path keeps the worst parts of the storm well away from major population centers and ports, which means the impacts on supply should be localized despite the dangerous nature of this storm. Numerous ports in Florida and further east in the Gulf Coast have begun to limit operations as the storm passes and terminals in the area are expected to close around noon today. Non-essential personnel are being moved off of oil platforms in the Gulf of Mexico, but the storm is far enough east that it shouldn’t do any damage to production or refining assets.
The other type of storm in Tampa that’s been causing all sorts of headaches for suppliers attempting to top off tanks ahead of Idalia may require an EPA waiver to allow the contaminated product to be re-loaded onto ships and sent back to a refinery rather than attempting to truck out millions of gallons of transmix, which could take months given the location and looming demand for trucks in the wake of the hurricane.
Hurricane Franklin has reached Category 4 status in a reminder of what record warm water temperatures can produce as it moves north roughly 500 miles east of Jacksonville FL this morning but is hooking east and will stay far off shore. The NHC is tracking 2 other systems in the Atlantic, both given 50% odds of being named, but both looking like they’ll also stay out to sea.
The EPA issued a waiver for El Paso’s boutique 7.0lb RVP gasoline Monday, citing unplanned outages at the Alon Big Spring and Marathon El Paso refineries that have caused fuel shortages in recent weeks. The waiver allows for 9lb RVP gasoline, or 10lb RVP if blended with ethanol, through the end of the summer-grade season ending September 16.
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View AllThe Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.
The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.
We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.
The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.
There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.
As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.
Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.