Gasoline Prices Drag Energy Complex Modestly Lower
Gasoline prices are dragging the rest of the energy complex modestly lower to start Thursday’s trading, as they face a trio of headwinds this week. Refinery runs cranking up as Gulf Coast plants recover from storms, plummeting RIN values that reduce the cost of compliance for refiners, and a seasonal demand slowdown now that the 2021 driving season is officially behind us.
The Washington Rumor mill continues to roil RIN markets this week. Both Bloomberg and Reuters published notes Wednesday based on a leaked document that claims to show the EPA proposing cuts of roughly 15% to the blending mandates for refiners in 2020 and 2021. The market had been selling this rumor for more than a week already, with prices having already dropped nearly 30 cents since Labor day, but still dropped sharply following this. D6 ethanol RINs for 2021 traded down to 92 cents, the lowest since Mid-January, before seeing a modest bounce back to the 97-98 cent/RIN range to end the day. It’s important to note that these cuts are not yet finalized, and in the case of the 2020 volumes, they would represent a retroactive change to the “final” rule that was published in February, which makes the entire program look even more like a farce unenforceable.
Wednesday’s DOE report was highlighted by a big jump in refinery runs, as all but 2 Gulf Coast plants look to be back online after Hurricane Ida. Diesel saw the start of its fall demand spike, while gasoline consumption looks like it’s ready to start the winter doldrums.
The FED continued to telegraph the end of its money printing bond buying programs, and suggested that even though interest rates aren’t going to go up soon, they could start as early as mid-2022 if the recovery stays on track. Equity markets seemed to find that plan to be “good enough” and have recovered the majority of Monday’s heavy losses.
That’s not what we meant by zero carbon: A shortage of carbon dioxide, caused in large part by surging natural gas prices, is adding yet another major threat to supply chains around the world that are already struggling. This could trickle down to increased demand for crude and diesel this winter as natural gas demand reaches its peak during cold stretches. This situation also sheds a harsh light on the logistical challenges faced by the net-zero movement.
The storm soon to be named Sam is expected to swell to major hurricane status early next week. So far, most models continue to show it hooking north and keeping it offshore, but there’s still a chance that path could change.
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Week 48 - US DOE Inventory Recap
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Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
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Week 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Gasoline and oil prices are attempting to rally for a 2nd straight day, a day ahead of the delayed OPEC meeting, while diesel prices are slipping back into the red following Tuesday’s strong showing.
The API reported gasoline inventories dropped by 898,000 barrels last week, crude inventories declined by 817,000 barrels while distillates saw an increase of 2.8 million barrels. Those inventory stats help explain the early increases for RBOB and WTI while ULSD is trading lower. The DOE’s weekly report is due out at its normal time this morning.
A severe storm on the Black Sea is disrupting roughly 2% of the world’s daily oil output and is getting some credit for the bounce in futures, although early reports suggest that this will be a short-lived event.
Chevron reported that its Richmond CA refinery was back online after a power outage Monday night. San Francisco spot diesel basis values rallied more than a dime Tuesday after a big drop on Monday following the news of that refinery being knocked offline.
Just a few days after Scotland’s only refinery announced it would close in 2025, Exxon touted its newest refinery expansion project in the UK Tuesday, with a video detailing how it was ramping up diesel production to reduce imports and possibly allow for SAF production down the road at its Fawley facility.
Ethanol prices continue to slump this week, reaching a 2-year low despite the bounce in gasoline prices as corn values dropped to a 3-year low, and the White House appears to be delaying efforts to shift to E15 in an election year.
Click here to download a PDF of today's TACenergy Market Talk.
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.