Petroleum Product Inventories Boosted Futures

Market TalkThursday, Oct 21 2021
Pivotal Week For Price Action

An across-the-board draw in petroleum product inventories boosted futures prices yesterday after the big three (gasoline, diesel, and WTI crude) tried to start the day with modest losses. Gas and diesel saw the largest drawdowns in stocks at 5.4 million barrels and 3.9 million barrels, respectively. Likewise, the two refined product contracts lead the complex higher, each posting a ~1.3% gain on the day.

While the combination of growing adoption of renewable fuel and collective abandonment of coal usage is expected to cut emissions over the next 30 years, the EIA still anticipates a 5% increase in the world’s CO2 footprint through 2050.  

RIN prices are rallying this week after completely recovering from last month’s selloff surrounding the fake(?) email containing biofuel blending targets. Both ethanol (D6) and biodiesel (D4) credits added 5 ½ cents yesterday, bringing their price to $1.41 and $1.67, respectively.

Diesel prices in the Midwest have hit fresh 16-month lows against the New York Harbor Heating Oil contract. While it is common to see prices in the region slope off with the cooling weather, witnessing it happen this early, and in the middle of harvest season, is uncommon. Seasonally high days of supply seem to be the culprit for the dropping prices in the Heartland.

The European crude oil benchmark hit fresh multi-year highs in overnight trading before pulling back with the rest of petroleum futures early this morning. Whether this morning’s action is profit taking, ‘Reversal Thursday’, or the beginning of the sizable pullback some are anticipating is yet to be seen. What has been seen, over the past couple weeks, is early morning selling reversed mid-day as some traders find a reason to continue buying.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Market Talk Update 10.21.21

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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.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

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