Recovery Rally On Shaky Ground
The recovery rally in energy futures is on shaky ground to start Friday’s trading, as the gains made earlier in the week are quickly evaporating.
While stock markets seem to have put the Coronavirus fears on ice, petroleum contracts are having a harder time escaping the threat of demand destruction from China’s quarantine.
Refined products continue to cling to modest gains for the week, while oil prices have seen their gains erased and are on pace for a fifth straight week of losses.
The January jobs report was stronger than most estimates in terms of job creation, with 222,000 new jobs added in the month and the November/December estimates were both revised higher. Both the headline and U.S. unemployment rates ticked up slightly during the month, as the labor participation rate increased, and offset the increase in total jobs. Both U.S. equities and energy futures ticked lower immediately after the report, but have since recovered and seem to be shrugging off this piece of news.
Tensions are ramping up between the U.S. and Russia again, with the treasury reportedly considering sanctions against Rosneft over its ties with Venezuela, at the same time as a military standoff in Syria between the old cold war foes. It’s impossible to say what impact any sanctions might have until we know what they are, there’s certainly a possibility that they could end up pushing prices higher if they disrupt the global flow of oil.
RIN values have been on a steady climb higher ever since a court ruled against the EPA’s extension of three small refinery waivers from the RFS. D6 Ethanol RINs traded up to a seven month high Thursday, and have nearly doubled in value so far in 2020.
Click here to download a PDF of today's TACenergy Market Talk.
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Week 48 - US DOE Inventory Recap
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Week 48 - US DOE Inventory Recap
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.
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.