Oil And Diesel Prices Continue To March Higher
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.
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The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.
The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.
We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.
The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.
There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.
As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.
Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.