Gasoline Prices Touch Fresh Three-Year High

Market TalkMonday, Mar 15 2021
Pivotal Week For Price Action

The energy complex is seeing a modest round of selling Monday morning, after gasoline prices touched a fresh three year high overnight. Diesel prices were leading the move lower initially, after ULSD futures failed to break above the highs set a week ago, and signaling that buyers may finally be losing their conviction after one of the largest rallies on record. We’ll need to see another 5-6 cents of losses before the bullish trend line is threatened however, and with the recent buy-the-dip pattern well established, it’s too soon to see this as more than just another small correction.

RBOB futures broke through the highs from 2019 Friday morning, ending the chance of a double top pattern at that level, and set a new, three year high at $2.17 before pulling back in the past few hours. The next big test on the gasoline charts is the 2018 high of $2.2855, and after that we’d need to 2014 when prices were still in the $3 range to find major chart resistance. Given the spare oil and refining capacity globally, it seems unlikely that we could make a serious run at the $3 mark, but then again, when priced dipped below $1 November 1 it seemed unlikely we’d see prices double over the next 4.5 months.

No major developments in the refinery restart races. Diesel remains tight across large portions of the southern U.S., while regular unleaded is generally well supplied. One complication popped up Friday as Colonial pipeline reported that the slower flow rates caused by refinery cuts along the Gulf Coast may mean shippers in the South East may struggle to turn their tanks ahead of the spring RVP transition. 

RIN prices continued their run higher Friday, with both the D4 and D6 contracts trading near all-time highs north of $1.40. Ethanol prices have quietly joined the rally reaching new three year highs, as strong export volumes and corn prices both add to the bullish tone set by gasoline prices. One thing this new RIN rally may encourage is for E15 blends to finally find some momentum in locations capable of handling them since there’s a strong financial incentive to blend more ethanol given the big RIN discounts at play.

OPEC increased its global GDP and oil demand estimates in its March oil market report, thanks in large part to the viral spread of fiscal stimulus around the world, in addition to vaccine rollouts that are beginning to get people moving again. The cartel’s output dropped by 647mb/day during the month, as Saudi Arabia made good on its pledge to cut around one million barrels/day of output, which allowed other country’s to increase their output and take advantage of the higher prices. Even though the OPEC & friends agreement was not changed at the last meeting, Saudi Arabia has no obligation to continue that extra million barrel cut, and the timing with which it brings those barrels back online could be pivotal for prices across the entire energy complex.

In other non-restart refinery news today: More bad news for the Limetree Bay (FKA Hovensa) refinery as it comes under more scrutiny from the EPA, this time for a February disruption that polluted water in neighboring communities. Neste has announced it has picked the port of Rotterdam as the site of a new renewable fuel production facility it intends to build, but won’t have more detailed plans on the exact location or timing until the end of the year. 

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

TACenergy MarketTalk 031521

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Pivotal Week For Price Action
Market TalkMonday, Oct 2 2023

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.

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.