How Are Tariff Delays Affecting Overnight Selling?

Market TalkTuesday, Dec 10 2019
Week 44 - US DOE Inventory Recap

After some modest overnight selling in both equity and energy futures, we’re seeing prices recover following reports that the US & China are planning to delay new tariffs ahead of the December 15 deadline.

The FED’s FOMC meeting kicks off today, and their policy decision will be announced tomorrow. While no interest rate changes are expected, based on where FED fund futures are trading, the FED Chair’s press conference following the announcement will be closely watched for signals of plans in 2020.

What might this mean for energy prices? Perhaps not much as the charts below show correlations between energy futures and their equity and currency counterparts have broken down for much of the past several months, although at times (like this morning) we still see stocks and commodities moving in lockstep.

We’re approaching the winter doldrums for energy demand, with just 2 weeks left of the pre-Christmas rush, that’s typically followed by the weakest few weeks of demand for the year. So far refinery margins are holding up much better than a year ago (see the crack charts below) and the forward curve suggests margins will hold in better-than-average territory. Those improvements in crack spreads may continue to put downward pressure on basis values – particularly in markets not directly impacted by the IMO spec changes – as plants look to be incentivized to run full rates even during the upcoming soft-demand season.

The EIA published a note on the carbon allowance cooperative of 10 North East US states this morning. So far this effort at containing carbon emissions isn’t having a direct impact on refined products, but is likely to become a bigger issue in the coming years as more states seek ways to appear as though they’re doing something about climate change.

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

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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