Record Smashing Numbers In DOE’s Status Report

Market TalkThursday, Mar 4 2021
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Buy the dip is the theme of the week as multiple selloff attempts have all failed, holding energy futures above their bullish trend lines and keeping the door open for a rally north of $2 for refined products this spring. We saw another example overnight as three cent losses for refined products have turned into two cent gains in the past hour. Despite the bullish pattern, prices still have some work to do in order to break through the high trades set last week, and if the worst rash of refinery shutdowns ever wasn’t enough to send prices above $2, the bulls may soon be hard pressed to make an argument for what it will take to do so.

Record smashing numbers in the DOE’s weekly status report caused by the unprecedented events of the past few weeks helped prices recover from an early round of selling Wednesday. That said, in total, those events have had a relatively muted impact on most fuel prices, in large part thanks to the unprecedented events we’ve been living through for the past year.

In the 30 years that the DOE has been publishing data, U.S. refinery utilization had never dropped below 66% of capacity. Last week, it dropped to 56% as the data caught up to the most widespread refinery disruption event in history. That drop, coupled with a surge in imports, created the largest crude oil build on record, and the largest drawdown in gasoline stocks, and yet prices were only able to manage a modest rally. For comparison, when utilization dipped below 70% following hurricanes Katrina (2005) and Ike (2008) we saw price increases of $1-$2/gallon in many markets. Today, even though utilization just smashed its record low, most markets are still trading below $2/gallon, and outages have been largely contained to small pockets of the country thanks to major refinery capacity expansions in the past 15 years and the sluggish demand caused by COVID shutdowns.

Diesel and premium UNL continue to be the biggest supply challenges as the refinery restarts continue their painfully slow process, although outages are proving to be short lived in most instances. Group 3 ULSD continues to be the standout for price action, surging to 30 cent premiums to ULSD futures as inventories in the region approach historic lows and resupplies are pulled to neighboring markets.

The OPEC & friends meeting is ongoing and so far there’s been little official word of what the official decision will be, leaving most of the market guessing on what the outcome will be today, or if there will even be an official announcement at all.

Click here to download a PDF of today's TACenergy Market Talk.

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Market TalkMonday, Oct 2 2023

Gasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading

Gasoline futures are leading the energy complex higher this morning with 1.5% gains so far in pre-market trading. Heating oil futures are following close behind, exchanging hands 4.5 cents higher than Friday’s settlement (↑1.3%) while American and European crude oil futures trade modestly higher in sympathy.

The world’s largest oil cartel is scheduled to meet this Wednesday but is unlikely they will alter their supply cuts regimen. The months-long rally in oil prices, however, has some thinking Saudi Arabia might being to ease their incremental, voluntary supply cuts.

Tropical storm Rina has dissolved over the weekend, leaving the relatively tenured Philippe the sole point of focus in the Atlantic storm basin. While he is expected to strengthen into a hurricane by the end of this week, most projections keep Philippe out to sea, with a non-zero percent chance he makes landfall in Nova Scotia or Maine.

Unsurprisingly the CFTC reported a 6.8% increase in money manager net positions in WTI futures last week as speculative bettors piled on their bullish bets. While $100 oil is being shoutedfromeveryrooftop, we’ve yet to see that conviction on the charts: open interest on WTI futures is far below that of the last ~7 years.

Click here to download a PDF of today's TACenergy Market Talk.

Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

The 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.

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

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.

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