Oil And Diesel Prices Continue To March Higher

Market TalkFriday, Dec 20 2019
Week 44 - US DOE Inventory Recap

The December rally continues as oil and diesel prices continue to march higher, setting fresh 3-month highs on a daily basis in decidedly undramatic fashion. The small daily moves on light volume certainly give a counter argument to anyone suggesting this represents a true technical breakout, and while the activity has been lackluster so far, it feels like another big swing (similar to what we saw on Black Friday) could be coming any day.

US GDP grew 2.1% in the 3rd quarter, a “good enough” number that was in line with previous estimates, and should keep the FED from changing its plans for the early part of 2020. Equity and energy markets did not seem to react much to that news. For a more interesting take on this topic, take a look at how just 31 US counties make up 1/3 of Total US GDP, with Los Angeles leading the way.

Gasoline basis values on the Gulf Coast broke out of their winter doldrums Thursday, rallying nearly 3 cents/gallon in addition to the gains in futures on rumors of refinery issues. The reports were not substantiated in the state emission filings, so it’s hard to say if it was truly a refinery issue that caused the run-up, or if it had to do with lower liquidity and a scheduling deadline. If it’s the latter we would normally see those values drop back in the next few sessions, but with Christmas fast approaching, we may not see much activity at all.

Speaking of which, here’s Christmas Holiday Trading schedule: Tuesday 12/24 will see early settlements and closing for NYMEX futures contracts and spot market assessments will follow suit. Christmas day will have no futures or spot market activity until futures resume in the normal overnight session for Thursday. Thursday and Friday will be regular days for futures and spots, except that fewer people will be around to participate. Rack prices published Tuesday afternoon will carry through Thursday.

The giant 2,300 page spending bill (that apparently needs to be passed in order to know what’s in it) made it through the Senate on Thursday, and is expected to be signed by the President today. Here’s why that bill looks to be good news for numerous Renewable Diesel projects scheduled to come online in the next few years, but bad news for some electric vehicle projects.

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

Oil And Diesel Prices Continue To March Higher gallery 0

News & Views

View All
Pivotal Week For Price Action
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.

Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

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