Prices Are Taking A Breather This Morning As Prices Continue To Slog Through Their Sideways Summer Trading

Market TalkThursday, Jun 29 2023
Pivotal Week For Price Action

Gasoline prices led the energy complex higher Wednesday as we approach the holiday weekend with record setting travel volumes expected in the US. Prices are taking a breather this morning as prices continue to slog through their sideways summer trading pattern with no clear direction on the charts, and plenty of fundamental discord to keep traders guessing.

The US commerce department revised its Q1 GDP figures up to 2% growth from earlier estimates of 1.3%, a major correction for that report, primarily reflecting stronger export activity (thanks oil) and consumer spending.   

While a 10-million-barrel drop in oil inventories grabbed the headlines yesterday, perhaps the most bullish numbers from the DOE’s weekly report was strong export figures that show crude oil shipments out of the US at their 2nd highest level ever, and diesel shipments at their highest level of the year. Propane and propylene shipments also surged to a new record high, which certainly suggests that there are plenty of international buyers for US petroleum products, despite so many warnings of a looming recession.

While the SPR continues to drop to multi-decade low levels, despite the DOE’s proud announcements of purchases to refill the reserve, the Cushing OK hub has stockpiles steadily growing and reaching a 2-year high last week.

Average retail diesel prices are down almost $2/gallon from year-ago levels as the supply crunch so feared over the winter never materialized. PADD 1 diesel stocks however have dropped below year-ago levels this week for the first time since January, despite another very weak demand estimate last week that puts total US diesel consumption below the COVID summer of 2020 levels. Gulf Coast diesel supplies are ample however, holding near their 5-month average, which is putting downward pressure on forward basis values.

Today’s interesting read: Are Indian refiners reaching the limits of their Russian oil binge?

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

Market Talk Update 06.29.2023

News & Views

View All
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.