It’s Been A Wild Week Since The Black Friday Meltdown

Market TalkFriday, Dec 3 2021
Pivotal Week For Price Action

The volatility continues in energy prices with Thursday’s session featuring multiple nickel swings and a 13 cent trading range for refined products, and Friday’s session starting out on a strong but cautious note. It’s been a wild week since the Black Friday meltdown, and the forward curve charts below help put some perspective on how dramatically the landscape for petroleum products has changed in that time.

OPEC & Friend’s decided to stick with their current plan to increase production by 400,000 barrels/day each month, which caused a bit of a flash crash yesterday morning, with refined products dropping from nickel gains to nickel losses in just a matter of minutes, before recovering back to nickel gains later in the day…only to have those gains wiped out in the afternoon. The theory on why prices have found a temporary floor even though OPEC didn’t slow its production plans is that the cartel must not see Omicron as having a long term impact on global demand if they’re willing to stick to their plans. In addition, the cartel did leave the door open to additional changes if needed to stabilize the market.

RIN trading had been unusually quiet over the past week as traders seemed more focused on the wild swings in refined products and ethanol prices, but sold off sharply Thursday afternoon dropping to 2 month lows following a Reuters report that the EPA would finally be releasing its past-due RVO figures and that retroactive reductions in blending obligations were expected. The drop in RIN values, which is continuing this morning, offers a little relief to refiners that have seen their gross margins hit hard over the past month as refined products have led crude lower since prices peaked. 

The November jobs report showed an increase of 210,000 jobs during the month and another substantial decrease in both the headline and real (U6) unemployment rates. Both October and September’s jobs estimates were increased. Equity and energy prices ticked modestly higher after the report, and then gave back those gains, but the moves were minor in comparison to what we’ve become accustomed to this week. 

This week’s interesting read:  Enron’s complicated legacy on the 20th anniversary of its bankruptcy.

Today’s less interesting, but still noteworthy read: An EIA note this morning highlights the widening of crude oil price spreads owing to returning OPEC Production and higher natural gas prices. 

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

Market Talk Update 12.03.21

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Pivotal Week For Price Action
Market TalkThursday, Mar 28 2024

Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

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
Pivotal Week For Price Action
Market TalkWednesday, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

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