Pause Continues As Markets See Small Losses

Market TalkTuesday, Dec 8 2020
Late Rally Pushes Prices Into The Green

The pause continues as energy and equity markets see small losses for a second straight day following a strong rally. The pullback is minor so far, and has not yet threatened the upward sloping trend-lines in either asset class. 

There’s little in the way of news driving markets this morning, and considering the demand concerns growing along with new shutdown orders, it’s fairly remarkable that we haven’t seen more of a pullback – particularly in gasoline prices. 

RIN prices continue to rally even as crop prices move sideways, suggesting the market continues to bet on the regime change in Washington being more favorable to renewables than refiners. The extra cost associated with the surge in RIN prices for the refiners who don’t have their own renewables to blend could be the breaking point for some plants that have been barely hanging on through the pandemic. There have not been any new refinery closure/conversion announcements yet this week, but we still have three days to go.

A federal court ruling threw out a lawsuit against Colonial pipeline and its subsidiary for blending butane into gasoline along its system, because the shipper is receiving the quality of gasoline it was promised at the destination. While that decision flew under the radar last week – which is just the way I’m sure most pipeline operators would prefer it – it is a big win for pipeline systems that supplement their income via blending operations, and a big loss for traditional blenders that are losing their ability to do so.

More details are emerging in the corruption and bribery case that ended with Vitol agreeing to pay a $160 million fine to regulators in the U.S. and Brazil. The Bloomberg article suggests Glencore and Trafigura are currently under investigation as well for similar allegations.

Meanwhile, the CME group has launched trading in its California Water Futures contract that offers the ability to hedge (or speculate) on the price of water in the largest (and one of the most drought-prone) U.S. markets. 

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Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Nov 29 2023

The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week

Gasoline and oil prices are attempting to rally for a 2nd straight day, a day ahead of the delayed OPEC meeting, while diesel prices are slipping back into the red following Tuesday’s strong showing. 

The API reported gasoline inventories dropped by 898,000 barrels last week, crude inventories declined by 817,000 barrels while distillates saw an increase of 2.8 million barrels. Those inventory stats help explain the early increases for RBOB and WTI while ULSD is trading lower. The DOE’s weekly report is due out at its normal time this morning. 

A severe storm on the Black Sea is disrupting roughly 2% of the world’s daily oil output and is getting some credit for the bounce in futures, although early reports suggest that this will be a short-lived event. 

Chevron reported that its Richmond CA refinery was back online after a power outage Monday night. San Francisco spot diesel basis values rallied more than a dime Tuesday after a big drop on Monday following the news of that refinery being knocked offline.

Just a few days after Scotland’s only refinery announced it would close in 2025, Exxon touted its newest refinery expansion project in the UK Tuesday, with a video detailing how it was ramping up diesel production to reduce imports and possibly allow for SAF production down the road at its Fawley facility. 

Ethanol prices continue to slump this week, reaching a 2-year low despite the bounce in gasoline prices as corn values dropped to a 3-year low, and the White House appears to be delaying efforts to shift to E15 in an election year. 

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

Pivotal Week For Price Action
Market TalkTuesday, Nov 28 2023

Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week

The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday. 

Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.

Reversal coming?  Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.

Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness. 

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