Political Posturing Has Short-Lived Impact On Prices
The rollercoaster action in energy futures continues this week as some political posturing proved to have a short-lived impact on prices, and the weekly fundamental data offered a mixed bag to traders.
RBOB gasoline continues to be the most volatile contract, bouncing 9 cents off of its lows Wednesday, only to drop nearly 3 cents again overnight. That bounce was significant for short term charts as it broke the lower highs pattern we’d seen so far in August, and creates a more neutral outlook near term, although longer term charts continue to suggest there’s more selling to come by fall.
The big rebound in prices Wednesday came after the White House appeared to walk back their earlier comments about OPEC output, saying the statements issued were “not meant to be for immediate response”. The WH Press secretary did not answer a follow up question asking them to explain how asking OPEC to pump more oil squared with their climate change agenda.
In addition, the letter sent to the FTC “encouraging them to consider” making sure the rules they already have in place are being followed because gasoline and crude oil prices haven’t been moving together lately, looks a little silly considering that the Department of Energy has published multiple reports just this week explaining why gasoline spreads & prices have reached multi-year highs.
The DOE’s weekly report was lacking in big numbers, with only small changes in inventory levels. Refinery runs did tick up in 4 out of 5 PADDs, in what could be the summer production peak before fall maintenance (or hurricane season) starts to reduce run rates. Gasoline demand estimates were down 3.5% on the week, but a tick higher in exports kept inventories from building.
Tropical Storm Fred lost strength crossing the mountains of Hispaniola yesterday, and forecasts suggest it will struggle to reach 60mph winds before making landfall on the Florida panhandle early next week. The lack of strength and path well east of the oil production and refining areas should make this a relative nonevent for fuel supply. Don’t relax just yet however, as there’s already another system coming in Fred’s wake given a 60% chance of being named next week, and with this year forecasted to be busy, it seems like just a matter of time before one of these storms heads for refinery row.
Today’s interesting read: How Chevron & Exxon are working to co-process renewable diesel and SAF through their existing refining systems, a method that could dramatically speed up and reduce costs of producing those bio-based fuels, and perhaps further challenge the feedstock market if the technology is proven and approved.
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Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
Week 39 - US DOE Inventory Recap
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View AllThe Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.
The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.
We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.
The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.
There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.
As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.
Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.