Energy Prices Are Trying To Rally To Start Wednesday’s Session, Despite Reports Of More Inventory Builds

Market TalkWed, Jun 26, 2024
Energy Prices Are Trying To Rally To Start Wednesday’s Session, Despite Reports Of More Inventory Builds

Energy prices are trying to rally to start Wednesday’s session, despite reports of more inventory builds, as the choppy back and forth action continues. For Brent crude, this would mark a 7th day of alternating results, with the $85 mark acting as a magnet for prices to return to short term. WTI is in its 5th straight day of alternating between gains and losses, while refined products are acting just slightly more bullish, hovering just a few cents below multi-month highs.

The API reported a build in gasoline stocks of more than 3.8 million barrels last week, despite anecdotal evidence that demand had ticked up across the country during the heatwave. The API also reported a small build in crude oil stocks of just under 1 million barrels, while distillates declined by 1.2 million barrels. The DOE’s weekly report is due out at its normal time this morning. The EIA this morning published a note highlighting that US energy production had exceeded consumption by a record amount in 2023. Many will cheer this as a major success in energy independence, while US refiners may also lament the fact that this means they’re more dependent than ever on being able to sell their product overseas.

Ethanol prices have rallied to an 8 month high this week, despite a drop in corn prices. It appears that some supply tightness in Europe is contributing to the bid in the US. Ethanol and biodiesel producers are still lobbying the EPA to change their mind on the Renewable Fuel Standard targets for 2024 and 2025, filing a new petition this week to try and get the mandate increased to boost RIN values that have crushed many producers in their slide from $1.50/RIN a year ago to around $.55/RIN today.

The NHC is tracking 2 storm systems with 20-30% odds of being named in the next week. While the odds of either system becoming a major threat to energy infrastructure are low, their development areas do give some potential for heading to the refining zone, so they’ll be watched closely for a few more days. It’s very early in the season to be talking about this type of threat, but given the record warm water temperatures, there’s no reason we couldn’t see an early storm threat this year.

You want something from me? Exxon is taking a new tactic in its negotiations with striking refinery workers at its Gravenchon refinery in France, threatening to suspend production at the facility if access continues to be blocked. Considering that the worker are protesting a planned shutdown of the facilities chemical manufacturing units at the facility in the first place, it doesn’t seem like the company is bluffing. Striking workers are also faced with the reality that the entire Atlantic basin is seeing ample supplies of diesel fuel, reducing the leverage they may have had a couple of years ago in these strikes.

The final report from the US Chemical Safety board on the BP/Husky refinery explosion that killed 2 workers in 2022 offers a harsh reminder on how complex modern refinery operations can be. The report noted more than 3,700 alarms sounded in the 12 hours leading up to the event, which “distracted and overwhelmed” operators. Both BP and Husky have an unfortunate track record on blowing up other facilities before selling them to new owners such as BP Texas City (now Marathon’s Galveston Bay plant that continues to have a rough safety track record) and Husky’s Superior WI facility that blew up in 2018 and was sold to Cenovus along with the rest of Husky’s operations.

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Energy Prices Are Trying To Rally To Start Wednesday’s Session, Despite Reports Of More Inventory Builds