Rally-Or-Else Time For Energy Futures

Market TalkFriday, May 3 2019
Bulls Have Taken Back Control Of Energy Markets

It’s rally-or-else time for energy futures after the 2nd heady daily sell-off in the past week has knocked 7% or more off most petroleum contracts, and left them on the verge of a technical breakdown. Brent crude dipped briefly below the $70 mark Thursday, and RBOB broke below $2 for a few minutes during the lows of the day, erasing almost all of their April gains and setting up an important technical test over the next few days.

If those levels break for good, it looks like there’s plenty of room to fall before the next layers of chart support come into play, and could easily mean another $5/barrel losses for Crude and 10-15 cents for refined products. Then again, we’ve seen this market bounce sharply after a brief liquidation plenty of times over the years, so we can’t call an end to the bull run just yet.

More bad news on the West Coast, the P66 refinery in Carson CA was hit by a another fire Thursday afternoon. No word yet on the impact to production, and it’s 5am on the West Coast as I write this so no spot trading has taken place to gauge the market reaction.

The April payroll report showed an increase of 263,000 jobs for the month, and the headline unemployment rate dropped to a 20 year low of 3.6%, while the “U-6” rate held steady at 7.3%. Equity and energy markets had a modestly positive reaction to the new that seems strong enough to keep recession fears at bay for a while longer, while not so strong as to risk the FED rethinking their stance of holding interest rates steady.

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Pivotal Week For Price Action
Pivotal Week For Price Action
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.