Gasoline Prices Recoup Heavy Losses

Market TalkFriday, Aug 6 2021
Pivotal Week For Price Action

Gasoline prices have recouped most of the heavy losses suffered in the front half of the week, but need to extend this two day rally to avoid more downward pressure as charts continue to favor lower prices. The September RBOB contract (RBU) continues to be the standout in the entire complex as we begin the early stages of the fall RVP transition, and summer spec products start to become scarce. ULSD and WTI have also seen nice rebounds off of Wednesday’s lows, but are still pointed for large losses on the week and hinting at more to come.

The relative strength in gasoline prices has pushed crack spreads to 2 year highs, providing some much needed relief to the beleaguered refining industry. On the other hand, RIN values are about $1.50/gallon higher than they were 2 years ago, which offsets a large portion of that improvement in the gross refining margins. Perhaps an even bigger concern for refiners is that the traditional driving season is quickly coming to a close, and with so much uncertainty about what the winter will bring with the various COVID variants, these current values may look lofty in the near future.

For a contrary opinion, See this Reuters article on Chinese fuel demand for a good break down of how gasoline consumption remains on pace to hit a record this year despite the recent increases in COVID cases.

The US president signed an executive order on “Strengthening American Leadership in Clean Cars and Trucks” Thursday. In that order the EPA & Transportation secretaries were told to “…consider beginning work on rules” that would push for 50% of new vehicles to be carbon neutral, and to increase the fuel efficiency of traditional vehicles starting with model year 2027. Note the order wasn’t to begin the work, but to consider beginning the work. Based on that, and Washington’s general inefficiency, it seems more likely that the rules will still be debated in 2027 rather than having them adopted.  

Perhaps the most notable detail (which naturally is overlooked) is that the President also encouraged the agencies to follow California’s lead in adopting these standards, which could mean the continued spread of the LCFS & Cap & Trade programs.

(c) Given the significant expertise and historical leadership demonstrated by the State of California with respect to establishing emissions standards for light-, medium-, and heavy-duty vehicles, the Administrator of the EPA shall coordinate the agency’s activities pursuant to sections 2 through 4 of this order, as appropriate and consistent with applicable law, with the State of California as well as other States that are leading the way in reducing vehicle emissions, including by adopting California’s standards.   

The FERC rejected a request by airlines and cargo plane operators to grant emergency access to Kinder Morgan’s SFPP North line system to get more fuel to Reno, but ordered the parties involved to establish a conference aimed at “resolving current and long-term issues” regarding to that pipeline’s capacity. The order did not require a singing of Kumbaya at the end of the conference.

2 potential storm systems continue to be watched by the NHC, with the 2nd still given 60% odds of developing next week.

Click here to download a PDF of today's TACenergy Market Talk. 

Market Update 8.6.21

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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.