How Long Will It Last?

Market TalkWednesday, Mar 25 2020
Energy Prices Set All Sorts Of Records

How long will it last? That seems to be the question of the day, whether in regards to the virus, shelter-in-place orders, or the recovery rally in stocks and energy prices after the DJIA had its best percentage gain in 87 years Tuesday.

Unfortunately, so far this morning it seems like the answer to the recovery rally is not very long as both stocks and energy futures have given back most of their overnight gains and several contracts are now moving lower. RBOB gasoline futures are holding to modest gains in the April and May contract, although remain well off their intra-day highs from Tuesday’s session.

From a short term technical perspective, this overnight pullback is looking bearish for energy futures as prices were unable to break the downward sloping trend-line that’s been in place since the March 9 price plunge. With fundamental supply/demand issues still just a guessing game, if those technical resistance layers aren’t breached this week, there’s a good chance we’ll see another round of heavy selling soon.

Worth noting in the political drama playing out in Washington: One of the sticking points in the stimulus package is the attempt to tie cleaner jet fuel requirements to any bailouts of the airline industry.

Speaking of Jet Fuel, the EPA is reportedly considering allowing temporary waivers to allow jet fuel to be blended with other lower-sulfur diesel grades to help the industry alleviate a glut of the suddenly unwanted product. The EPA is also considering a waiver or delay of the summer RVP requirements for gasoline, as winter grade inventories are piling up and may not be transitioned in time.

Following moves at numerous petroleum refineries this week, ethanol production facilities are announcing numerous cut backs to offset the plunge in ethanol-blended gasoline demand. On the bright side, as predicted, some ethanol producers (along with other alcohol distillers) are temporarily ramping up production of sanitizers instead of their normal products.

The API reported inventory draws across the board last week with Crude stocks down 1.2 million barrels, gasoline down 2.6 million barrels and distillates down 1.9 million barrels. The DOE’s weekly status report is due out at its normal time today, and the agency has not yet indicated that reporting would be delayed in the future due to the change in employees working remotely.

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

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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