Oil Prices Attempting To Rally Ahead Of Weekly Inventory Reports

Market TalkTuesday, Jul 30 2019
Energy Prices Treading Water

Oil prices are attempting to rally ahead of the weekly inventory reports and the FOMC’s highly anticipated announcement due tomorrow. WTI rallied right back into the 200 day moving average that helped reject last week’s rally attempt, which makes a good pivot point to watch as the market continues its search for direction. If WTI can sustain a push above that level, it seems likely that we’ll see a run at $60, which should help products add another 8-10 cents. If it fails again, it seems more likely we’ll see another test of the lower end of our summer trading range.

Traders have priced in a 100% probability that the FOMC will cut its interest rate target tomorrow by at least 25 points, and a 25% chance of a 50 point cut. That certainty of a rate cut is getting some of the credit for the early rally in energy prices, although stock markets are pointed to a lower open, which contradicts that theory. Odds are that without any news from the Strait of Hormuz, interest rates are the easiest thing to explain a brief bit of buying.

A US federal appeals court rejected PDVSA’s appeal, and set the stage for Citgo’s assets to be seized and sold to pay off a previous $1.4 billion judgement against the Venezuelan oil company. Don’t expect changes any time soon however as it looks like this could get appealed again to the US Supreme court, and it’s hotly debated just who is in fact legally in charge of PDVSA these days.

The stream of oil company earnings reports continue this week, with mixed results so far and more signals that smaller drillers are continuing to struggle, which may mean less drilling activity in the US in the back half of the year. The multi-billion dollar question is when that slowdown in drilling will actually translate to less oil production, as the log of drilled but uncompleted wells (DUCs) may keep output rising for some time.

The storm system heading towards Florida was “downgraded” by the NHC in its latest advisory, with a 0% chance of development over the next 48 hours, and only a 10% chance of development over the next 5 days. No doubt the weather channel will continue showing it multiple times an hour this week, but it appears this will be a non-issue for fuel supplies in the area.

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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.

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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.

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Pivotal Week For Price Action