Inventory Declines And Refinery Issues
Inventory declines and more refinery issues have gasoline futures trading at 6 month highs today, with some regional US markets seeing their highest levels in a year. Gasoline futures are trying to drag crude and diesel prices on another rally, but so far are being met with a bit of apathy from the other energy contracts.
There were unconfirmed reports Tuesday of 2 more fires at Gulf Coast refineries, and Midwestern gasoline stocks were reported to have reached their lowest April levels in more than 5 years, after reaching record highs just 2 months ago. Both of these issues seemed to help encourage more strength in regional basis differentials, in addition to the gains in futures.
Adding to the upward momentum overnight, late Tuesday afternoon the API was reported to show a 7 million barrel decline in gasoline stocks last week, which appears to be driving the overnight strength in gasoline prices (both outright and spreads). Diesel inventories were said to drop by 2.4 million barrels, while crude oil inventories increased by 4.1 million barrels. The DOE’s weekly report is due out at its regularly scheduled time this morning.
While the spring rally has pushed near-term prices for the big-4 petroleum futures contracts (WTI, Brent, ULSD & RBOB) to their highest levels in the past 5-6 months, forward values have actually declined in some cases as short term supply concerns give-way to longer term economic growth concerns, and perhaps due to producers using this rally as an opportunity to increase their hedge positions on expected output in coming years.
Fake News? The Business Times of China reported that a fire at the Phillips 55 refinery was contributing to $4 retail gasoline prices in California. Not sure if that’s a witty poke at the refiner’s operating performance or just a bit of lost-in-translation. To be fair, if I was reporting on Chinese refineries, it’s safe to say my pronunciation would miss the mark by more than 11.
Today’s interesting read: A $254 million loss in Trafigura’s trading book provides the latest in a long list of examples of how complex hedging physical commodities can be.
Latest Posts
Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
Energy Futures Are Drifting Quietly Higher This Morning
Refined Products Holding Close To Break Even While Oil Prices Are Losing Just Under 1%
Social Media
News & Views
View All
Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
The energy complex is trading modestly lower so far this morning with WTI crude oil futures leading the way, exchanging hands $1.50 per barrel lower (-1.9%) than Tuesday’s settlement price. Gasoline and diesel futures are following suit, dropping .0390 and .0280 per gallon, respectively.
A surprise crude oil build (one that doesn’t include any changes to the SPR) as reported by the American Petroleum Institute late Tuesday is taking credit for the bearish trading seen this morning. The Institute estimated an increase in crude inventories of ~5 million barrels and drop in both refined product stocks of 1.5-2.2 million barrels for the week ending April 26. The Department of Energy’s official report is due out at it’s regular time (9:30 CDT) this morning.
The Senate Budget Committee is scheduled to hold a hearing at 9:00 AM EST this morning regarding a years-long probe into climate change messaging from big oil companies. Following a 3-year investigation, Senate and House Democrats released their final report yesterday alleging major oil companies have internally recognized the impacts of fossil fuels on the climate since as far back as the 1960s, while privately lobbying against climate legislation and publicly presenting a narrative that undermines a connection between the two. Whether this will have a tangible effect on policy or is just the latest announcement in an election-yeardeluge is yet to be seen.
Speaking of deluge, another drone attack was launched against Russian infrastructure earlier this morning, causing an explosion and subsequent fire at Rosneft’s Ryazan refinery. While likely a response to the five killed from Russian missile strikes in Odesa and Kharkiv, Kyiv has yet to officially claim responsibility for the attack that successfully struck state infrastructure just 130 miles from Moscow.
The crude oil bears are on a tear this past week, blowing past WTI’s 5 and 10 day moving averages on Monday and opening below it’s 50-day MA this morning. The $80 level is likely a key resistance level, below which the path is open for the American oil benchmark to drop to the $75 level in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Energy Futures Are Drifting Quietly Higher This Morning
Energy futures are drifting quietly higher this morning as a new round of hostage negotiations between Israel and Hamas seem to show relative promise. It seems the market is focusing on the prospect of cooler heads prevailing, rather than the pervasive rocket/drone exchanges, the latest of which took place over Israel’s northern border.
A warmer-than-expected winter depressed diesel demand and, likewise, distillate refinery margins, which has dropped to its lowest level since the beginning of 2022. The ULSD forward curve has shifted into contango (carry) over the past month as traders seek to store their diesel inventories and hope for a pickup in demand, domestic or otherwise.
The DOE announced it had continued rebuilding it’s Strategic Petroleum Reserve this month, noting the addition of 2.3 million barrels of crude so far in April. Depending on what the private sector reported for last week, Wednesday’s DOE report may put current national crude oil inventories (include those of the SPR) above the year’s previous levels, something we haven’t seen since April of 2022, two months after Ukraine war began.
The latest in the Dangote Refinery Saga: Credit stall-out, rising oil prices, and currency exchange.
Click here to download a PDF of today's TACenergy Market Talk.