Presidents’ Day Kicking Off With Slow Start
Presidents’ Day 2019 is kicking off with a relatively slow start in energy markets this morning. The ‘big three’ benchmark contracts are showing modest upside bias but will likely end today’s abbreviated session quietly as most American traders have taken the day off. Refined products are bouncing around unchanged while WTI opts to add about 50 cents. The European benchmark, ICE’s Brent Crude Oil, is lacking conviction in its upward move as well, only adding 15 cents to its prompt month contract so far this morning.
Baker Hughes reported an additional 3 oil production rig startups last week, bringing the total operating count to 857. The ~2 month long rally in crude prices can be loosely attributed to the “whatever it takes” strategy OPEC has employed to prop up weak benchmark prices: slashing production runs in member nations, including the cartel’s main player Saudi Arabia. Somewhat of a wildcard when it comes to production strategy (and most other things too), Russia claims to be accelerating current cuts to boost prices as well.
After last week it appears that the spring rally in gasoline prices, and the energy complex by association, is in full swing. Most technical indicators are flashing green for RBOB futures as they have pushed through the upper end of the trading range they have been captive to since December. Technical resistance levels are the challenge this week, specifically today and tomorrow, as the front month contract trades up to the 100 day moving average this morning. Since there won’t be a settlement today, traders have two days to decide if gas prices are going to break above resistance and take a shot at last summer’s prices. Peg $1.58 as the pivotal price level, with $1.64 as the price target if the former can’t hold the rally.
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Week 48 - US DOE Inventory Recap
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Week 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Gasoline and oil prices are attempting to rally for a 2nd straight day, a day ahead of the delayed OPEC meeting, while diesel prices are slipping back into the red following Tuesday’s strong showing.
The API reported gasoline inventories dropped by 898,000 barrels last week, crude inventories declined by 817,000 barrels while distillates saw an increase of 2.8 million barrels. Those inventory stats help explain the early increases for RBOB and WTI while ULSD is trading lower. The DOE’s weekly report is due out at its normal time this morning.
A severe storm on the Black Sea is disrupting roughly 2% of the world’s daily oil output and is getting some credit for the bounce in futures, although early reports suggest that this will be a short-lived event.
Chevron reported that its Richmond CA refinery was back online after a power outage Monday night. San Francisco spot diesel basis values rallied more than a dime Tuesday after a big drop on Monday following the news of that refinery being knocked offline.
Just a few days after Scotland’s only refinery announced it would close in 2025, Exxon touted its newest refinery expansion project in the UK Tuesday, with a video detailing how it was ramping up diesel production to reduce imports and possibly allow for SAF production down the road at its Fawley facility.
Ethanol prices continue to slump this week, reaching a 2-year low despite the bounce in gasoline prices as corn values dropped to a 3-year low, and the White House appears to be delaying efforts to shift to E15 in an election year.
Click here to download a PDF of today's TACenergy Market Talk.
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.