Military Strikes Spur Energy Futures

Market TalkFriday, Jan 3 2020
Week 44 - US DOE Inventory Recap

U.S. military strikes in Iraq have spurred energy futures to their highest levels in more than seven months overnight, with most contracts up around four percent on the day. To be clear, there has been no immediate impact on oil supply, or even a direct threat on supplies in the region, but this situation is all about what might come next.

Is this the start of a larger military conflict between the U.S. and Iran that could threaten the Strait of Hormuz and 20 percent of the world’s oil supply? Or will this end up just another blip on the radar screen for an energy market like the attacks in Saudi Arabia or the sabotage to oil tankers last year due to ample global supplies and spare production capacity?

The reaction in stock markets to the news of the attacks is a good reminder that there could be a negative impact on fuel demand as well if this situation escalates.

The first test on the charts will be the high trades set in the wake of the Saudi Attacks last September, which were breached overnight by WTI, ULSD and RBOB futures, but have since pulled back below that level. As a reminder, within two weeks of the Saudi Attacks – which actually took more than five percent of global supply off the market temporarily – prices were lower than they had been prior.

RBOB futures are running into a cluster of resistance in the $1.77 range, which marks both the 200 day moving average on the continuation chart, and the high trades from September’s brief spike. For ULSD, the $2.10 range looks like the hurdle to clear if this rally is going to spark the next big move higher. If prices continue to push through the highs set in 2019, the next big targets on the charts are the 2018 high trades - roughly 30 cents above current values.

The fallout from the airstrikes in Iraq probably mean the market may shrug off the DOE’s weekly status report, which is due out at 11 a.m. EST due to the holiday this week.

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

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Market TalkFriday, Mar 1 2024

Oil Futures Are Leading The Energy Complex In A Modest Rally To Begin March Trading

Oil futures are leading the energy complex in a modest rally to begin March trading, with WTI and Brent both up around $1.50/barrel, while refined products are adding around 2 cents in the early going.

RBOB gasoline futures rolled to a summer-grade RVP with the April contract in prompt position this morning. West Coast cash markets are already converted to summer grades, so they’re holding their premiums to futures, while the markets east of the Rockies are now trading at substantial discounts to futures as they move through their remaining winter-cycles over the next 4-6 weeks. The high trade for the April RBOB contract last month was just north of $2.63, which sets the first layer of resistance to a March madness gasoline rally just about 3 cents north of current values.

While gasoline looks somewhat bullish on the charts, and has seasonal factors working in its favor, diesel prices look weak in comparison with prices reaching a 6-week low Thursday before finally finding a bid, and the roll to April futures cut out 3 cents from prompt values. Diesel prices also don’t enjoy the seasonal benefits of gasoline, with a winter-that-wasn’t offering no help for supplemental diesel demand to replace natural gas in the US or Europe.

Speaking of winter weather, the West Coast continues to get the worst of it in 2024, with a casual 10 feet of snow with 100+ mile an hour wind gusts hitting the Sierra Nevada range. While the worst of that winter storm is happening far from the coast, the San Francisco bay area is under a gale warning starting this afternoon.

The wildfires in the Texas panhandle are now the largest in state history, impacting more than 1 million acres of land. The P66 Borger refinery is caught between the blazes, but so far has not reported any operational issues or plans to change operations at the facility. Valero’s McKee refinery is located just 50 miles from Borger, but looks to be far enough north and West to not be threatened by the fires, for now at least.

Mass Exxodus? A Reuters report noted that Exxon had notified its traders that it was cutting their salaries, in another sign that the major’s move back into trading wasn’t going so well. Exxon’s Exodus has already been a bit of a joke for the past few years, and now that the traders are being targeted, don’t be surprised if the cube photos are taken to a new level.

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

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Market TalkThursday, Feb 29 2024

It's Another Mixed Start For Energy Futures This Morning After Refined Products Saw Some Heavy Selling Wednesday

It's another mixed start for energy futures this morning after refined products saw some heavy selling Wednesday. Both gasoline and diesel prices dropped 7.5-8.5 cents yesterday despite a rather mundane inventory report. The larger-than-expected build in crude oil inventories (+4.2 million barrels) was the only headline value of note, netting WTI futures a paltry 6-cent per barrel gain on the day.

The energy markets seem to be holding their breath for this morning’s release of the Personal Consumption Expenditures (PCE) data from the Bureau of Economic Analysis (BEA). The price index is the Fed’s preferred inflation monitor and has the potential to impact how the central bank moves forward with interest rates.

Nationwide refinery runs are still below their 5-year average with utilization across all PADDs well below 90%. While PADD 3 production crossed its 5-year average, it’s important to note that measure includes the “Snovid” shutdown of 2021 and throughput is still below the previous two years with utilization at 81%.

We will have to wait until next week to see if the FCC and SRU shutdowns at Flint Hills’ Corpus Christi refinery will have a material impact on the regions refining totals. Detail on the filing can be found on the Texas Commission on Environmental Quality website.

Update: the PCE data shows a decrease in US inflation to 2.4%, increasing the likelihood of a rate cut later this year. Energy futures continue drifting, unfazed.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

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