Oil And Diesel Prices Trading At Multi-Year Highs
Oil and diesel prices are trading at multi-year highs as June trading gets underway, with the charts favoring additional upside if this early rally can hold. Gasoline prices are also rallying, but are still two cents below their highs for the year. There’s not much fundamental news to pin the 3% rally on this morning. Equities are pointing higher and the dollar is pointing lower, both of which can encourage the energy bulls, and of course there are the usual suspects of demand optimism, shrinking global inventories and a lack of a deal with Iran that can take blame for any rally.
Money managers added to their long bets in WTI and ULSD last week, while cutting back on RBOB and Brent positions. A large round of short covering pushed ULSD’s net length to its highest level in 2.5 years, but unlike recent weeks, its European counterpart Gasoil did not increase in tandem.
Baker Hughes reported a net increase of three oil rigs working in the U.S. last week, two of which were in the Permian basin. That brings the Permian and Total U.S. counts to fresh one year highs, but the totals are still just over half of what they were prior to the pandemic, even as oil prices are approaching three year highs.
ExxonMobil’s pipeline company reported a gasoline leak in Harris County over the weekend and shut the line as investigations and repairs get underway. It’s not yet clear which if the company’s numerous pipeline segments in the area is impacted by that shutdown, and what terminal(s) may feel a supply crunch as a result, but there’s a good chance since it was gasoline that spilled it was the line running to DFW that is offline.
Today’s Interesting read from the WSJ: Why the Californication of fuel programs will make $5 gasoline a reality.
The IEA published a look this morning at the types and sources of biofuels that will help achieve a net zero by 2050 scenario, with organic waste streams expected to take the largest piece of the supply chain, followed by short rotation woody crops.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllEnergy Prices Fluctuate: Chinese Imports Surge, Saudi Arabia Cuts Output and Buys Golf
Energy prices continue their back-and-forth trading, starting Wednesday’s session with modest gains, after a round of selling Tuesday wiped out the Saudi output cut bounce.
A surge in China’s imports of crude oil and natural gas seem to be the catalyst for the early move higher, even though weak export activity from the world’s largest fuel buyer suggests the global economy is still struggling.
New tactic? Saudi Arabia’s plan to voluntarily cut oil production by another 1 million barrels/day failed to sustain a rally in oil prices to start the week, so they bought the PGA tour.
The EIA’s monthly Short Term Energy Outlook raised its price forecast for oil, citing the Saudi cuts, and OPEC’s commitment to extend current production restrictions through 2024. The increase in prices comes despite reducing the forecast for US fuel consumption, as GDP growth projections continue to decline from previous estimates.
The report included a special article on diesel consumption, and its changing relationship with economic activity that does a good job of explaining why diesel prices are $2/gallon cheaper today than they were a year ago.
The API reported healthy builds in refined product inventories last week, with distillates up 4.5 million barrels while gasoline stocks were up 2.4 million barrels in the wake of Memorial Day. Crude inventories declined by 1.7 million barrels on the week. The DOE’s weekly report is due out at its normal time this morning.
We’re still waiting on the EPA’s final ruling on the Renewable Fuel Standard for the next few years, which is due a week from today, but another Reuters article suggests that eRINs will not be included in this round of making up the rules.
Click here to download a PDF of today's TACenergy Market Talk.
Week 23 - US DOE Inventory Recap
Energy Prices Retreat, Global Demand Concerns Loom
So much for that rally. Energy prices have given back all of the gains made following Saudi Arabia’s announcement that it would voluntarily withhold another 1 million barrels/day of oil production starting in July. The pullback appears to be rooted in the ongoing concerns over global demand after a soft PMI report for May while markets start to focus on what the FED will do at its FOMC meeting next week.
The lack of follow through to the upside leaves petroleum futures stuck in neutral technical territory, and since the top end of the recent trading range didn’t break, it seems likely we could see another test of the lower end of the range in the near future.
RIN prices have dropped sharply in the past few sessions, with traders apparently not waiting on the EPA’s final RFS ruling – due in a week – to liquidate positions. D6 values dropped to their lowest levels in a year Monday, while D4 values hit a 15-month low. In unrelated news, the DOE’s attempt to turn seaweed into biofuels has run into a whale problem.
Valero reported a process leak at its Three Rivers TX refinery that lasted a fully 24 hours. That’s the latest in a string of upsets for south Texas refineries over the past month that have kept supplies from San Antonio, Austin and DFW tighter than normal. Citgo Corpus Christi also reported an upset over the weekend at a sulfur recovery unit. Several Corpus facilities have been reporting issues since widespread power outages knocked all of the local plants offline last month.
Meanwhile, the Marathon Galveston Bay (FKA Texas City) refinery had another issue over the weekend as an oil movement line was found to be leaking underground but does not appear to have impacted refining operations at the facility. Gulf Coast traders don’t seem concerned by any of the latest refinery issues, with basis values holding steady to start the week.
Click here to download a PDF of today's TACenergy Market Talk.