Prices Are Trickling Back Into Their Sideways Pattern

Market TalkThursday, Oct 24 2019
Prices Are Trickling Back Into Their Sideways Pattern

It’s another quietly red start for energy futures as the enthusiasm for some bullish headline numbers in Wednesday’s DOE report starts to wear off and prices are trickling back into their sideways pattern.   There is a chance for a technical breakout however, with product prices near the top of their recent range following a strong couple of days, but we’ll need to see RBOB hold above $1.65 and HO above $1.97 before confirming the chance for a substantial move higher.

Although across-the board inventory declines were enough to spur a solid 1-day rally, that enthusiasm may be tempered by a large increase in refinery runs that suggest US plants have made the seasonal turn out of fall maintenance, and production rates should increase for the next 8-10 weeks.  That increase in refinery runs was most notable in PADD 5 (West Coast) where rates have gone from below the low end of the 5 year seasonal range, to above the high end in just 3 weeks, which is no doubt to the drop of $1/gallon in CA gasoline prices in October.

Diesel inventories across most of the country remain tight, with the nationwide Days of Supply calculations holding below their 5-year seasonal range for a 2nd straight week.  The East Coast looks to have the most concern after PADD 1 stocks dropped for a 5th straight week, which has pushed NYH basis values higher, and sparked a resurgence in activity for space on the Colonial pipeline.

Although total US gasoline inventories have declines for 4 straight weeks, they remain above their 5 year average for this time of year.  With refinery runs cranking back up, and the seasonal demand slowdown looming, it’s becoming hard to make a fundamental argument for stronger gasoline prices over the next few months.

The EIA published a look at US product exports this morning, highlighting the continued growth in refined product sales overseas.  The product mix is worth noting however as gasoline exports have declined this year, while the bulk of the growth came from sales of propane.

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Pivotal Week For Price Action
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Market TalkWednesday, Nov 29 2023

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.

Pivotal Week For Price Action
Market TalkTuesday, Nov 28 2023

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.