Record-Breaking Heat Bakes The South/ System Outages After Cyber-Attack
Energy futures drift lower to start Tuesday’s trading session, lacking any compelling headlines to shift sentiment one way or another so far this morning. The prompt month HO contract, which expires on Friday along with its gasoline counterpart, is the only one of the ‘big three’ benchmarks not trading lower this morning. The American crude oil benchmark is approaching the lower boundary of the trading range its adhered to for the past couple months, and may test the $67 price floor in short order.
The remnants of Tropical Storm Cindy may reorganize in the coming week but current forecasts have it staying out at sea, away from US energy infrastructure.
While its currently all quiet on the Atlantic front, severe weather is still making headlines as thunderstorms continue thrashing the Midwest and record-breaking heat bakes the South. Valero’s Meraux and Shell’s Norco refinery both experienced power outages in the last 72 hours as extreme heat tests power grids all along the Gulf Coast. BP’s Whiting refinery is also recovering from a disruption after storms rolled through the area, knocking out power to several units and causing an unplanned flaring.
Suncor Energy reported various system outages after experiencing a cyber attack over the weekend. The breadth and depth of the damage is unclear but the Canadian refiner assures none of its counterparties’ or employees’ data is at risk. It’s yet to be seen what affect this might have on the refined product markets in Colorado, where Suncor operates the state’s lone refinery. As of right now it seems unlikely, we’ll see the same price blowout experienced back in Q1’23 when the plant was knocked offline due to winter storms.
Of note: it’s been 2 years since hackers pressed pause on the Colonial Pipeline, stopping refined product shipments on the US’s main supply artery. The attack incited panic buying around the nation as some cities along the pipeline’s path reported gas station outages.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllThe 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.
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.