Energy Markets Regain Upwards Momentum On Bullish Headlines

A handful of bullish headlines helped energy markets find a strong bid Monday, regaining the upward momentum lost at the end of last week. So far this morning buyers are hesitant to follow through with refined products trading down around a penny, while WTI and Brent cling to small gains.

The IEA painted a bullish picture in its monthly oil market report, increasing global demand estimates for the balance of the year as China’s recovery exceeds expectations, and developed nations return to growth in Q2. The report noted that Russian exports have reached a post-invasion high in the past month, with new refining capacity in the eastern hemisphere bringing new crude buyers to the market and putting downward pressure on crack spreads.  The report also noted that while negative economic sentiment has pushed prices lower this year, global inventories may come under pressure as OPEC’s cuts start to take hold.

The DOE is patting itself on the back via an SPR replenishment solicitation issued Monday, noting how it contributed to lowering gasoline prices while announcing a repurchase of 3 million barrels of crude, that amounts to just over 1% of the total amount released over the past 2 years.   

Wildfires spreading rapidly across Alberta have sparked emergency evacuations and shut in more than 300,000 barrels/day of oil production, most of which is shipped to the US. 

The tragic story of the Texas City – aka Galveston Bay - refinery continues after an employee was killed and 2 more injured in a fire Wednesday. That refinery is the 3rd largest in the country, and is the same facility that killed 15 employees in a 2005 explosion under prior ownership.  The company has not yet filed a report with the TCEQ, and Gulf Coast basis markets didn’t react much to the news, suggesting that output at the plant may not see a major impact.

P66 notified TX regulators that it may be forced to shut an FCC unit at its Borger refinery in the TX panhandle for 2 weeks. That facility has struggled to get back to normal operating rates since the Christmas even blizzard. While its location and relatively small size means that won’t have an impact on spot market pricing, it adds to the long list of supply disruptions to hit the South Western US so far this year. 

The good news for buyers in the region is that prices are returning to earth after an extended period of extreme tightness now that 2 other local refiners have returned from maintenance, which may limit the impact of this latest production hiccup.

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