It’s A Mixed Bag For Energy Futures So Far This Morning
It’s a mixed bag for energy futures so far this morning. American diesel and crude oil benchmarks are trading higher to start the day while gasoline futures seek to extend yesterday’s heavy selling. The prompt month RBOB contract, the main driver of national gasoline prices, has dropped over 25 cents from Monday and over a dollar since setting highs back in June.
Rumors of a very hot Consumer Price Index headline figure circulated news outlets yesterday afternoon. If confirmed to be correct, the CPI, used as a measure for how much general goods and services cost to the average consumer, has risen another 1.1% in June, bumping the annual inflation rate to 8.8%. The Bureau of Labor Statistics is set to release their report at 8:30 Eastern, and we’ll find out of the leaked figured were in fact fake.
The Energy Information Administration published an article today highlighting the continuation of lofty RIN prices last month. The EIA mentions it’s the increase in blend stock prices that is driving the credit prices higher, as a part of a story we are not unfamiliar with. It looks like it might be a different case this month as we see edible oils, wheat, and corn prices plummet as countries shift policies/strategies to cope with the shortages caused by the war in Ukraine.
Well the rumored CPI numbers ended up being fabricated, but the lie seems much more palatable than the truth. Inflation costs for consumers raised by 1.3% last month, compared to the 1.1% “estimated” yesterday, solidifying the annual inflation rate as the highest its been in 41 years. It won’t come as a surprise to anyone that commutes: the increase in the cost of gasoline was the largest month-over-month percentage point increase.
Click here to download a PDF of today's TACenergy Market Talk.
From the Bureau of Labor Statistics
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View AllEnergy Prices Fluctuate: Chinese Imports Surge, Saudi Arabia Cuts Output and Buys Golf
Energy prices continue their back-and-forth trading, starting Wednesday’s session with modest gains, after a round of selling Tuesday wiped out the Saudi output cut bounce.
A surge in China’s imports of crude oil and natural gas seem to be the catalyst for the early move higher, even though weak export activity from the world’s largest fuel buyer suggests the global economy is still struggling.
New tactic? Saudi Arabia’s plan to voluntarily cut oil production by another 1 million barrels/day failed to sustain a rally in oil prices to start the week, so they bought the PGA tour.
The EIA’s monthly Short Term Energy Outlook raised its price forecast for oil, citing the Saudi cuts, and OPEC’s commitment to extend current production restrictions through 2024. The increase in prices comes despite reducing the forecast for US fuel consumption, as GDP growth projections continue to decline from previous estimates.
The report included a special article on diesel consumption, and its changing relationship with economic activity that does a good job of explaining why diesel prices are $2/gallon cheaper today than they were a year ago.
The API reported healthy builds in refined product inventories last week, with distillates up 4.5 million barrels while gasoline stocks were up 2.4 million barrels in the wake of Memorial Day. Crude inventories declined by 1.7 million barrels on the week. The DOE’s weekly report is due out at its normal time this morning.
We’re still waiting on the EPA’s final ruling on the Renewable Fuel Standard for the next few years, which is due a week from today, but another Reuters article suggests that eRINs will not be included in this round of making up the rules.
Click here to download a PDF of today's TACenergy Market Talk.
Week 23 - US DOE Inventory Recap
Energy Prices Retreat, Global Demand Concerns Loom
So much for that rally. Energy prices have given back all of the gains made following Saudi Arabia’s announcement that it would voluntarily withhold another 1 million barrels/day of oil production starting in July. The pullback appears to be rooted in the ongoing concerns over global demand after a soft PMI report for May while markets start to focus on what the FED will do at its FOMC meeting next week.
The lack of follow through to the upside leaves petroleum futures stuck in neutral technical territory, and since the top end of the recent trading range didn’t break, it seems likely we could see another test of the lower end of the range in the near future.
RIN prices have dropped sharply in the past few sessions, with traders apparently not waiting on the EPA’s final RFS ruling – due in a week – to liquidate positions. D6 values dropped to their lowest levels in a year Monday, while D4 values hit a 15-month low. In unrelated news, the DOE’s attempt to turn seaweed into biofuels has run into a whale problem.
Valero reported a process leak at its Three Rivers TX refinery that lasted a fully 24 hours. That’s the latest in a string of upsets for south Texas refineries over the past month that have kept supplies from San Antonio, Austin and DFW tighter than normal. Citgo Corpus Christi also reported an upset over the weekend at a sulfur recovery unit. Several Corpus facilities have been reporting issues since widespread power outages knocked all of the local plants offline last month.
Meanwhile, the Marathon Galveston Bay (FKA Texas City) refinery had another issue over the weekend as an oil movement line was found to be leaking underground but does not appear to have impacted refining operations at the facility. Gulf Coast traders don’t seem concerned by any of the latest refinery issues, with basis values holding steady to start the week.
Click here to download a PDF of today's TACenergy Market Talk.