Now What? That Seems To Be The Question Of The Morning After Energy Prices Spiked

Market TalkTuesday, Feb 22 2022
Pivotal Week For Price Action

Now what?  That seems to be the question of the morning after energy prices spiked and equity futures sold off sharply after the news broke of troops being ordered into the breakaway regions of Ukraine Monday afternoon.  While WTI and RBOB did touch new 7 year highs overnight, they’ve since pulled back by 5 cents or more and stocks have recovered most of their losses, as an eerie sense of calm has taken over while the world tries to figure out what comes next. 

The markets now have to guess if this is just another step closer to Russian taking the rest of Ukraine, or a way for Putin to back down while still being able to claim victory on both political and economic fronts. 

Interestingly enough, stocks seemed to get a small boost, and energy futures pulled back from their highs, after reports that China is not backing Russia’s move, saying that the Ukraine is not an exception to sovereign rights for all nations, which could help limit the economic fallout of this event. Those reports did not mention China’s stance on Taiwan or Hong Kong’s sovereignty. 

March RBOB futures did trade north of $2.80 overnight, while the April (summer-spec) contract touched a high of $2.9375 putting it within easy striking distance of the $3 mark when it takes over the prompt position this time next week. ULSD futures did not join the rest of the complex in setting fresh 7 year highs overnight as the extreme backwardation we saw earlier in the month has evaporated and knocked 10 cents off of prompt prices. ULSD did break back north of $2.90 for a while overnight however, so it’s too soon to rule out a push towards the $3 mark for diesel, especially if the Natural Gas markets get rolling.

Speaking of which, so far natural gas markets in the US and UK seem to be taking news that Germany will halt certification of the Nordstream 2 pipeline from Russia in stride, which may help explain the relatively muted response in the rest of the energy arena. 

While cash traders largely took the day off Monday without the reporting agencies assessing spot markets, so far there’s not much happening in physical or credit markets, which is likely a sign of the wait and see trade. 

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

Market Talk Update 02.22.22

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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.

Pivotal Week For Price Action
Market TalkTuesday, Mar 26 2024

Refined Products Seeing Small Losses Of Around A Penny While Crude Oil Contracts Hover Just Above Break Even

Energy futures are taking a breather to start Tuesday’s trading, with refined products seeing small losses of around a penny while crude oil contracts hover just above break even.

No new news on either the Red Sea shipping or Russian Refining attacks this morning, so Cocoa prices seem to be taking over the commodity headlines while energy markets wait on their next big move.

RBOB gasoline futures set a new 6-month high Monday at $2.7711, which leaves the door open on the weekly charts for the spring rally to continue. A run at the $3 mark is certainly possible in the next few weeks before the typical seasonal price peak is set just before the start of driving season.

A container ship lost power and crashed into the Francis Scott Key bridge in Baltimore this morning, causing a devastating collapse. While cargo shipping into the area will no doubt be impacted by this event, fuel supplies are unlikely to see any notable change since the 9 fuel terminals in Baltimore are primarily supplied by Colonial pipeline. Barges from Philadelphia refineries do supplement Baltimore supplies at times, and those vessel flows will be impacted at least until rescue operations are completed and the bridge sections removed from the waterway. That said, since shipping up from the Gulf Coast via Colonial is generally cheaper than shipping an NY Harbor-priced barrel south, the amount of supply disrupted by this event will be minimal.

While we’re still waiting on the official forecasts for the Atlantic Hurricane season, early reports continue to suggest that we could be in for a very busy year due to warm water temperatures and a forming La Nina pattern.

Dallas meanwhile is preparing for a different sort of disruption, with city officials encouraging companies to let employees work from home during the solar eclipse on April 8th as metroplex traffic is expected to surge. While some isolated fuel outages are certainly possible if people start panic buying gasoline they don’t need, there’s no reason to expect any widespread impact from the demand spike.

Today’s interesting read: Why AI requires a staggering amount of electricity and may create supply competition for EVs that will end up benefitting fossil fuels.

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