International Tanker Rates Have Increased
International tanker rates reached an elevated $10/bbl yesterday, sending crude benchmarks lower Tuesday. Traders anticipate more crude will stay parked rather than being shipped for transcontinental arbitrages, leading to higher US stockpiles. That combined with an EIA estimate of an increase in shale oil production for November sent WTI 1.5% lower yesterday.
Two San Francisco Bay Area refineries experienced production disruptions yesterday in the wake of a 4.5 magnitude earthquake as measured by the US Geological Survey. Spot market reaction to the news was relatively mild for LA, with California grade diesel up about 2 cents on the news at yesterday’s settlement. The earthquake also caused a couple of ethanol tanks to catch fire at NuStar Energy’s Crockett plant. Fortunately the fire was quick contained and extinguished with no reported injuries.
The system in the Gulf of Mexico has cleared the Yucatan Peninsula and now has a 50% chance of organizing into a tropical storm over the next 5 days. Forecasts on its direction are still vague, placing its destination somewhere along the Texas and/or Louisiana coast. Refiners will be keeping a close eye on its progression and potential impacts.
The energy complex is mixed this morning, with RBOB and Brent crude sinking lower while HO and WTI are showing green. Save any more drama from the Middle East or US-China bickering, traders will be looking to the inventory reports due out today and tomorrow for price direction. It will be interesting to see if the anticipated impact of the premium over crude carrier services will bring down American crude oil exports, which have set seasonal highs every week this year, over the next month.
Click here to download a PDF of today's TACenergy Market Talk.
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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.
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.