Political Theatre In Washington This Week

Market TalkWednesday, Jan 13 2021
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The bull market continues in energy futures, with several NYMEX petroleum contracts reaching new 11 month highs this morning even as U.S. equity markets pull back, and fundamental reports flash warning signs about weak demand. 

As long as the trend-lines hold, the charts favor a run at $55 for WTI in short order, which should pull RBOB futures north of $1.60, and ULSD (which broke $1.60 overnight for the first time since February) towards $1.65.

The entire complex remains overbought, and due for a more substantial correction at some point, but as we’ve seen the past two weeks, the bulls are still eagerly buying any dips and keeping that trend line in place.

Plenty of political theatre going on in Washington this week, and while the news channels are focused on impeachment, the action for energy markets may be coming via the EPA. Yesterday the agency announced a new final ruling on how greenhouse gas emission standards may be set under the Clean Air Act.  Opponents see this as another last-minute attempt by the outgoing administration to complicate efforts to change policies by the incoming group, while proponents see this as just another step to limit the red tape in the EPA, which is seen by some as a major victory in the past four years. There is also an unsubstantiated report this week that the EPA may issue new small refinery waivers for 2019 – even as that issue is scheduled to go before the Supreme Court in a few months – which seems to be contributing to the pullback in RIN values. 

The API reportedly showed a draw in crude oil inventories of 5.8 million barrels last week, but builds in gasoline (1.9 million barrels) and distillates (4.4 million barrels). The DOE’s weekly report is due out at its regular time today. We may see some re-stocking on crude inventories in the new year, and demand will be watched closely as we just went through our worst couple of weeks for consumption by several accounts since the COVID lockdowns in April.

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

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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.

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

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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.

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