Gasoline Prices Finally Passed Out
Gasoline prices look like they’ve finally passed out after a 3 week Spring Breakout rally, pulling back more than a nickel since reaching a 5-month high at $1.98 in Tuesday’s session. So far the pullback hasn’t had much impact on diesel and crude oil prices which are all hovering around break-even levels.
For real this time? If RBOB settles lower today it would snap a streak of 8 consecutive gains for gasoline futures in the midst of their annual spring rally. In 7 of those sessions RBOB was trading lower in the morning only to end the day with gains. So what’s different this time around? The spreads have finally cried uncle with both calendar and basis spreads pulling back sharply from their stronger-than-normal levels. If this is in fact the end of the spring rally, it would stand as a 27 cent increase in the first 26 days of March, and a 60 cent increase from the January lows.
The sudden reversal comes despite reports that the backlog of vessels in the Houston ship channel continues to grow even though sections of the waterway have reopened, and a handful of refineries may be forced to reduce runs until it can be cleared. The EPA meanwhile is urging residents to avoid eating fish caught in the Houston ship channel due to the issues of the past week. Which begs the question, who thinks it is ever a good idea to eat fish from the Houston Ship Channel?
The API was said to report declines of refined products of 3.5 million barrels for gasoline and 4.3 million barrels of diesel, while US crude stocks increased by 1.9 million barrels. The DOE’s version of the weekly stats is due out at its normal time. Gasoline’s selling-off even while inventories decline is another sign that the momentum may be waning, although it’s worth noting that gasoline stocks almost always decline this time of year as the industry works through the spring RVP transition.
News from China continues to appear to be driving price action this week, as the engine that drove much of the world’s economic and oil consumption growth in the past decade continues to slow. This week it’s more weak economic data that seems to be creating a bit of a drag on both equity and energy futures. Meanwhile, China’s own crude oil contract appears to be catching on 1-year after it’s start, which could further threaten the volumes traded in WTI and Brent.
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Gasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading
Gasoline futures are leading the energy complex higher this morning with 1.5% gains so far in pre-market trading. Heating oil futures are following close behind, exchanging hands 4.5 cents higher than Friday’s settlement (↑1.3%) while American and European crude oil futures trade modestly higher in sympathy.
The world’s largest oil cartel is scheduled to meet this Wednesday but is unlikely they will alter their supply cuts regimen. The months-long rally in oil prices, however, has some thinking Saudi Arabia might being to ease their incremental, voluntary supply cuts.
Tropical storm Rina has dissolved over the weekend, leaving the relatively tenured Philippe the sole point of focus in the Atlantic storm basin. While he is expected to strengthen into a hurricane by the end of this week, most projections keep Philippe out to sea, with a non-zero percent chance he makes landfall in Nova Scotia or Maine.
Unsurprisingly the CFTC reported a 6.8% increase in money manager net positions in WTI futures last week as speculative bettors piled on their bullish bets. While $100 oil is being shoutedfromeveryrooftop, we’ve yet to see that conviction on the charts: open interest on WTI futures is far below that of the last ~7 years.
Click here to download a PDF of today's TACenergy Market Talk.
The 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.