Market Players Grapple With Numbers Never Seen Before
We’re seeing a modest round of “risk off” selling in energy and equity markets to start Thursday’s session, as recovery doubts appear to be growing and market players grapple with numbers they’ve never seen before.
This latest round of selling is pushing petroleum futures towards the lower end of their July trading range, which could mean sharp losses if support breaks down, but until it does these relatively small moves aren’t changing the neutral outlook. Peg $1.20 for products and $40 for WTI as must-hold levels this week to keep the sideways pattern intact.
The DOE’s weekly status report was highlighted by a 10 million barrel draw in U.S. crude oil inventories, and a tick higher in domestic fuel consumption. Seven million barrels of the crude draw was accounted for by a plunge in imports and stronger exports, with the balance made up for by a strong increase in refinery runs. The muted market reaction to that large draw suggests there is plenty of doubt that any of those three factors are sustainable as long as reopening plans continue to be delayed.
The rest of this week will be heavy on Q2 earnings reports, which are expected to be the worst in more than a decade for most oil producers and refiners. Shell reported an $18 billion loss for the quarter, as the demand slump wiped out its operational earnings and the company took at $16.8 write down of its assets, and cut its dividend for the first time in over 70 years.
On top of the Q2 earnings releases, this morning we got the official word on Q2 GDP which dropped by 32.9% on the quarter – and the crazy part is that was actually better than many forecasts.
Tropical Storm Isaias’ path shifted East over the past 24 hours, now threatening the eastern half of Florida, and the SE Atlantic coast. The NHC predictions continue to suggest that this system will not reach hurricane strength, but don’t be surprised if that changes quickly in the next several days as it reaches warmer water. Although Isaias currently looks like it will not threaten energy supply infrastructure in the gulf of Mexico, given that we’re still five weeks away from the peak of hurricane season, and there’s yet another system moving off the African coast this week, it’s feeling like just a matter of time before we see a system that creates a meaningful supply disruption.
Click here to download a PDF of today's TACenergy Market Talk.
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Week 48 - US DOE Inventory Recap
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Week 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Gasoline and oil prices are attempting to rally for a 2nd straight day, a day ahead of the delayed OPEC meeting, while diesel prices are slipping back into the red following Tuesday’s strong showing.
The API reported gasoline inventories dropped by 898,000 barrels last week, crude inventories declined by 817,000 barrels while distillates saw an increase of 2.8 million barrels. Those inventory stats help explain the early increases for RBOB and WTI while ULSD is trading lower. The DOE’s weekly report is due out at its normal time this morning.
A severe storm on the Black Sea is disrupting roughly 2% of the world’s daily oil output and is getting some credit for the bounce in futures, although early reports suggest that this will be a short-lived event.
Chevron reported that its Richmond CA refinery was back online after a power outage Monday night. San Francisco spot diesel basis values rallied more than a dime Tuesday after a big drop on Monday following the news of that refinery being knocked offline.
Just a few days after Scotland’s only refinery announced it would close in 2025, Exxon touted its newest refinery expansion project in the UK Tuesday, with a video detailing how it was ramping up diesel production to reduce imports and possibly allow for SAF production down the road at its Fawley facility.
Ethanol prices continue to slump this week, reaching a 2-year low despite the bounce in gasoline prices as corn values dropped to a 3-year low, and the White House appears to be delaying efforts to shift to E15 in an election year.
Click here to download a PDF of today's TACenergy Market Talk.
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.