Petroleum Complex Fell Out Of Bed Wednesday Morning With Refined Products And Crude Oil Down
It looks like petroleum complex fell out of bed Wednesday morning, with refined products down a 6-7 cents and crude oil down more than $2, but in reality this selling started just after Tuesday’s (strong) settlement and continued throughout the overnight session. The move lower has wiped out the gains of the previous two sessions, the leaves the energy complex on a precarious technical footing, and threatening a much bigger move lower after a strong rally for most of the past 18 months.
Yesterday’s API report is getting credit this morning for the drop in prices as the most heavy selling occurred shortly after that report was released. US Crude oil inventories built by nearly 3.6 million barrels last week, but refined products only saw small moves, and Cushing OK inventories dropped yet again. The DOE’s weekly report is due out this morning.
A fire broke out at the Shell refinery in Convent LA, as the company was attempting to start its main crude unit, delaying the lengthy repair process since the plant shut during Hurricane Ida more than 2 months ago. That news seemed to help RBOB futures find their footing after a weak start Tuesday, although clearly that strength is proving to be short lived. It’s worth noting that the $2.39 range for RBOB is where we’re seeing December futures trade currently, and
Refinery disruptions around the US, Canada and Europe are all contributing to some of the steepest backwardation in gasoline prices we’ve seen in a decade. NYH RBOB is worth nearly 14 cents more today than it is at the end of December, which helps explain why premiums for space on Colonial are barely positive even though there’s a 9 cent spread between the Gulf and the Harbor on a prompt basis.
Don’t be surprised if the next 24 hours is full of more price swings. We’ll get the FED’s announcement on tapering their money printing program later this afternoon, which has the potential to create big waves in financial markets including the energy arena, although many times we see a bit of a delayed reaction as the people still involved in trading need time to digest the statement.
OPEC and Friends meet tomorrow morning and usually we’ll see prices swing ahead of any official announcement – if there is one at all – as floating rumors to reporters seems to be a favorite past time at these events.
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.