Has Domestic Consumption Already Reached Its Peak?

Market TalkWednesday, Aug 18 2021
Pivotal Week For Price Action

Energy futures are trying to bounce after 4 days of selling have pushed the complex to the edge of a technical breakdown yet again. The difference this time, compared to the handful of other times we’ve seen technical support tested this summer, is that sentiment seems to have quickly shifted to acknowledge that domestic consumption may have already reached its peak for the year, with another long uncertain winter looming.  

We’ll need to see refined products rally another 5 cents or so from current levels to break the short-term downtrend, otherwise it looks like we’re set up for a test of the $2 mark for both gasoline and diesel as we move into September.

This Reuters article highlights the uneven demand recovery for petroleum products since the start of COVID, and why unfinished products are driving total consumption back above pre-pandemic levels even as traditional consumption stalls.

The API was said to show another week of only minor changes in US inventory levels, with crude and gasoline stocks both down around 1.2 million barrels, while diesel inventories were up around 500,000. The DOE’s weekly report is due out at its normal time this morning. 

Both Grace and Henri are now forecast to reach hurricane strength this week. Neither storm should be a major disrupter for energy supplies. Grace continues to shift south on its way towards Mexico, while Henri could brush Cape Cod on its way north, which could create some delays in vessel traffic in the region. 

A report from the Dallas FED this week highlighted the rapid growth of renewable energy sources in Texas over the past decade, and discusses the challenges that brings for the state’s electric grid, particularly with solar production set to quadruple in the next few years.

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

MT 8.18.21

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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