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

News & Views

View All
Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

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.

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

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.

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