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. 

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Market TalkFriday, Mar 1 2024

Oil Futures Are Leading The Energy Complex In A Modest Rally To Begin March Trading

Oil futures are leading the energy complex in a modest rally to begin March trading, with WTI and Brent both up around $1.50/barrel, while refined products are adding around 2 cents in the early going.

RBOB gasoline futures rolled to a summer-grade RVP with the April contract in prompt position this morning. West Coast cash markets are already converted to summer grades, so they’re holding their premiums to futures, while the markets east of the Rockies are now trading at substantial discounts to futures as they move through their remaining winter-cycles over the next 4-6 weeks. The high trade for the April RBOB contract last month was just north of $2.63, which sets the first layer of resistance to a March madness gasoline rally just about 3 cents north of current values.

While gasoline looks somewhat bullish on the charts, and has seasonal factors working in its favor, diesel prices look weak in comparison with prices reaching a 6-week low Thursday before finally finding a bid, and the roll to April futures cut out 3 cents from prompt values. Diesel prices also don’t enjoy the seasonal benefits of gasoline, with a winter-that-wasn’t offering no help for supplemental diesel demand to replace natural gas in the US or Europe.

Speaking of winter weather, the West Coast continues to get the worst of it in 2024, with a casual 10 feet of snow with 100+ mile an hour wind gusts hitting the Sierra Nevada range. While the worst of that winter storm is happening far from the coast, the San Francisco bay area is under a gale warning starting this afternoon.

The wildfires in the Texas panhandle are now the largest in state history, impacting more than 1 million acres of land. The P66 Borger refinery is caught between the blazes, but so far has not reported any operational issues or plans to change operations at the facility. Valero’s McKee refinery is located just 50 miles from Borger, but looks to be far enough north and West to not be threatened by the fires, for now at least.

Mass Exxodus? A Reuters report noted that Exxon had notified its traders that it was cutting their salaries, in another sign that the major’s move back into trading wasn’t going so well. Exxon’s Exodus has already been a bit of a joke for the past few years, and now that the traders are being targeted, don’t be surprised if the cube photos are taken to a new level.

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

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