Positive Long-Term Supply Outlook Pressures Energy Futures

Market TalkWednesday, Feb 15 2023
Pivotal Week For Price Action

Diesel prices are leading the energy complex lower to start Wednesday’s trading, following an optimistic report on global distillate supplies and more inventory builds in the US. 

The IEA’s monthly oil report forecasts global oil demand to grow by 2 million barrels/day this year, nearly half of which is due to China’s reopening. Jet Fuel will lead all other products with rapid growth in flights expected in Asia as a billion people start trying to move again. The report also highlighted the successful impact of price caps on Russian oil, noting that supplies have held up well, but Russia is only averaging about $50/barrel, and its fiscal revenues have dropped by 48% from a year ago. IF the new embargo and price caps on diesel go as well as the restrictions on crude oil, the agency thinks the world may weather the storm much better in 23 than it did last year. The report also was the latest to note that there is heavy refinery maintenance scheduled over the next couple of months that may keep supplies tight.

The API reported a huge build in crude oil inventories of more than 10 million barrels last week, even though no oil has been released from the SPR for over a month. That huge build may be a sign of the start of spring maintenance at numerous refineries, or perhaps an anomaly on the import/export flow. Refined products both saw modest builds of 846,000 barrels for gasoline and 1.7 million barrels for diesel. The DOE’s weekly report is due out at its normal time this morning and will be delayed a day next week due to President’s Day.

After more than 13 years of research, Exxon is reportedly walking away from its efforts to turn algae into biofuels, in the latest example of just how challenging it is to find a legitimate replacement for hydrocarbons.

Today’s interesting read: How the looming startup of the Dangote refinery in Nigeria could create structural shifts in the flow of oil and refined products, and the ships that move them.  The main question being when exactly that facility will begin operations. The plant has been in construction for more than a decade and was originally scheduled to come online in 2019.  Current estimates are for startup between Q1 and Q2 of this year.

There were 3 different refinery upsets reported to the TCEQ yesterday, Marathon’s El Paso refinery was forced to reduce runs after high winds caused power issues to that plant, which will only add to the strain of the supply network in the region that’s already been dealing with numerous planned and unplanned refinery outages.  Meanwhile, the Motiva Port Arthur refinery and P66 in Sweeny TX both reported unit upsets, although the cause or impact are still unclear and so far, seem to have little if any impact on basis values.

The award for meaningful refining upset of the day once again goes to the state of California, which saw gasoline basis values jump more than 10 cents, and diesel diffs rally by a nickel following yet another facility reportedly being forced to take a unit offline for unscheduled repairs.

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

Market Talk Update 02.15.2023

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Market TalkFriday, Sep 29 2023

The 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.

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

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.

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