It’s Been A Particularly Quiet Week For Oil Prices, With WTI Trading In Just A $3/Barrel Range

Market TalkFriday, Mar 8 2024
Pivotal Week For Price Action

Energy futures are limping into the weekend with modest losses, as the complex seems to be in wait and see mode before making its next move.

It’s been a particularly quiet week for oil prices, with WTI trading in just a $3/barrel range, which would market its smallest high to low move for a week since the Russian invasion of Ukraine. RBOB and ULSD prices also look to be treading water before their next move but continue to favor opposite directions with diesel prices looking weak on the charts, while gasoline still seems set up for a spring rally.

The market continues to act as though it’s shrugging off the now-deadly attacks on ships by Houthi Rebels, even though some suggest this latest escalation may cause more tankers to avoid the area. Meanwhile, the not-so-hidden shadow war between the US and Iran took its latest step forward when Iran announced it was confiscating the oil onboard a ship it seized last year.

The Keystone pipeline that runs more than 600mb/day of Canadian Crude into the US was taken offline for operational issues, briefly putting a bid under oil prices, but the line was returned to service without word as to the cause of the downtime. For a line that’s been operating at max capacity for years due to other lines not being approved, and that already had a major spill a couple years ago, these “integrity issues” in the line are eerily reminiscent of what we saw with Colonial pipeline ahead of its major leak in 2016.

Busy times in Port Arthur: Energy News Today reported that Motiva was forced to shut its “smaller” 200mb/day crude unit due to an operational upset this week, just days after the country’s largest refinery in Port Arthur TX restarted its larger CDU after extended maintenance, although so far no filing has been issued to the TCEQ. Meanwhile, Total reported multiple upsets at its Pt Arthur refinery that’s apparently still struggling to resume normal operations after the January freeze knocked it offline. Valero meanwhile is reportedly starting planned maintenance at its 335mb/day refinery nearby.

Suncor received the necessary permits to continue operating its Commerce City Colorado refinery, but new restrictions on chemicals and inspection requirements will have to be overcome, along with the normal challenges of trying not to break down or catch on fire.

It appears that more favorable weather conditions have put the worst of the record-setting TX wildfire in the rearview mirror, lowering the threat to a pair of panhandle refineries. Xcel energy has acknowledged that its power lines sparked the largest of the blazes, but disputes claims of negligence in its operations. Despite reports of more than 7,000 head of cattle being killed by the fires, cattle futures have not moved much either in the prompt or forward months.

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Market Talk Update 03.08.2024

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Pivotal Week For Price Action
Market TalkFriday, Apr 19 2024

Gasoline Futures Are Leading The Way Lower This Morning

It was a volatile night for markets around the world as Israel reportedly launched a direct strike against Iran. Many global markets, from equities to currencies to commodities saw big swings as traders initially braced for the worst, then reversed course rapidly once Iran indicated that it was not planning to retaliate. Refined products spiked following the initial reports, with ULSD futures up 11 cents and RBOB up 7 at their highest, only to reverse to losses this morning. Equities saw similar moves in reverse overnight as a flight to safety trade soon gave way to a sigh of relief recovery.

Gasoline futures are leading the way lower this morning, adding to the argument that we may have seen the spring peak in prices a week ago, unless some actual disruption pops up in the coming weeks. The longer term up-trend is still intact and sets a near-term target to the downside roughly 9 cents below current values. ULSD meanwhile is just a nickel away from setting new lows for the year, which would open up a technical trap door for prices to slide another 30 cents as we move towards summer.

A Reuters report this morning suggests that the EPA is ready to announce another temporary waiver of smog-prevention rules that will allow E15 sales this summer as political winds continue to prove stronger than any legitimate environmental agenda. RIN prices had stabilized around 45 cents/RIN for D4 and D6 credits this week and are already trading a penny lower following this report.

Delek’s Big Spring refinery reported maintenance on an FCC unit that would require 3 days of work. That facility, along with several others across TX, have had numerous issues ever since the deep freeze events in 2021 and 2024 did widespread damage. Meanwhile, overnight storms across the Midwest caused at least one terminal to be knocked offline in the St. Louis area, but so far no refinery upsets have been reported.

Meanwhile, in Russia: Refiners are apparently installing anti-drone nets to protect their facilities since apparently their sling shots stopped working.

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

Pivotal Week For Price Action
Market TalkThursday, Apr 18 2024

The Sell-Off Continues In Energy Markets, RBOB Gasoline Futures Are Now Down Nearly 13 Cents In The Past Two Days

The sell-off continues in energy markets. RBOB gasoline futures are now down nearly 13 cents in the past two days, and have fallen 16 cents from a week ago, leading to questions about whether or not we’ve seen the seasonal peak in gasoline prices. ULSD futures are also coming under heavy selling pressure, dropping 15 cents so far this week and are trading at their lowest level since January 3rd.

The drop on the weekly chart certainly takes away the upside momentum for gasoline that still favored a run at the $3 mark just a few days ago, but the longer term up-trend that helped propel a 90-cent increase since mid-December is still intact as long as prices stay above the $2.60 mark for the next week. If diesel prices break below $2.50 there’s a strong possibility that we see another 30 cent price drop in the next couple of weeks.

An unwind of long positions after Iran’s attack on Israel was swatted out of the sky without further escalation (so far anyway) and reports that Russia is resuming refinery runs, both seeming to be contributing factors to the sharp pullback in prices.

Along with the uncertainty about where the next attacks may or may not occur, and if they will have any meaningful impact on supply, come no shortage of rumors about potential SPR releases or how OPEC might respond to the crisis. The only thing that’s certain at this point, is that there’s much more spare capacity for both oil production and refining now than there was 2 years ago, which seems to be helping keep a lid on prices despite so much tension.

In addition, for those that remember the chaos in oil markets 50 years ago sparked by similar events in and around Israel, read this note from the NY Times on why things are different this time around.

The DOE’s weekly status report was largely ignored in the midst of the big sell-off Wednesday, with few noteworthy items in the report.

Diesel demand did see a strong recovery from last week’s throwaway figure that proves the vulnerability of the weekly estimates, particularly the week after a holiday, but that did nothing to slow the sell-off in ULSD futures.

Perhaps the biggest next of the week was that the agency made its seasonal changes to nameplate refining capacity as facilities emerged from their spring maintenance.

PADD 2 saw an increase of 36mb/day, and PADD 3 increased by 72mb/day, both of which set new records for regional capacity. PADD 5 meanwhile continued its slow-motion decline, losing another 30mb/day of capacity as California’s war of attrition against the industry continues. It’s worth noting that given the glacial pace of EIA reporting on the topic, we’re unlikely to see the impact of Rodeo’s conversion in the official numbers until next year.

Speaking of which, if you believe the PADD 5 diesel chart below that suggests the region is running out of the fuel, when in fact there’s an excess in most local markets, you haven’t been paying attention. Gasoline inventories on the West Coast however do appear consistent with reality as less refining output and a lack of resupply options both continue to create headaches for suppliers.

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