Recovery Rally Underway For Global Equity & Energy Markets

Market TalkFriday, Oct 12 2018
Recovery Rally Underway For Global Equity & Energy Markets

A recovery rally is underway for global equity & energy markets after a brutal 2 day selloff that knocked 6% off of oil prices and nearly 8% off of gasoline.

Despite unplanned refinery closures on both the East and West Coasts, gasoline prices fell to their lowest levels since March Thursday, before finally bouncing off of trend-support overnight. Something to watch today: RBOB futures spiked almost a nickel overnight as 1,500 contracts changed hands in 15 minutes just before midnight, only to give back almost all of those gains this morning. That could be a sign of a large player deciding it’s time to buy the dip, or that someone’s trading algorithm stayed up past its bedtime.

OPEC’s monthly oil market report showed the cartel increased its output in September – with increases from Saudi Arabia, Libya and Angola more than offsetting declines in Iran and Venezuela. The report also revised non-OPEC oil supply estimates higher and revised global oil demand estimates lower, which was more bearish news for a suddenly pessimistic market.

The IEA had similar sentiments in its monthly oil market report, reducing demand estimates as higher prices hit consumer’s pocket books, and increasing supply estimates as the US leads “fast” growth in global oil production. The agency does paint a more bullish picture longer term as higher standards of living should underpin global demand for years to come, while spare oil production capacity is dwindling.

Notes from the DOE weekly status report:

US Crude oil production set yet another record high at 11.2 million barrels/day, but is expected to drop next week due to the passage of Hurricane Michael. Take a look at the stalactite formation this time last year on the Crude Output chart below, which was caused by Hurricane Nate’s precautionary shut-downs in the Gulf of Mexico for an indication of what we can expect in the next couple of DOE reports.

US petroleum demand continues its seasonal decline, reaching its lowest level since early May, even with diesel consumption spiking as fall harvest activity nears its peak.

It should come as no surprise given the 40 cent difference in prices between the two, but gasoline stocks in the US are reaching glut levels while distillate inventories are tight. This is especially true in PADD 1, meaning we have the potential for large swings in futures (since the RBOB and ULSD contract delivery points are in New York) should there be any major winter storms this year.

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Market TalkThursday, Feb 29 2024

It's Another Mixed Start For Energy Futures This Morning After Refined Products Saw Some Heavy Selling Wednesday

It's another mixed start for energy futures this morning after refined products saw some heavy selling Wednesday. Both gasoline and diesel prices dropped 7.5-8.5 cents yesterday despite a rather mundane inventory report. The larger-than-expected build in crude oil inventories (+4.2 million barrels) was the only headline value of note, netting WTI futures a paltry 6-cent per barrel gain on the day.

The energy markets seem to be holding their breath for this morning’s release of the Personal Consumption Expenditures (PCE) data from the Bureau of Economic Analysis (BEA). The price index is the Fed’s preferred inflation monitor and has the potential to impact how the central bank moves forward with interest rates.

Nationwide refinery runs are still below their 5-year average with utilization across all PADDs well below 90%. While PADD 3 production crossed its 5-year average, it’s important to note that measure includes the “Snovid” shutdown of 2021 and throughput is still below the previous two years with utilization at 81%.

We will have to wait until next week to see if the FCC and SRU shutdowns at Flint Hills’ Corpus Christi refinery will have a material impact on the regions refining totals. Detail on the filing can be found on the Texas Commission on Environmental Quality website.

Update: the PCE data shows a decrease in US inflation to 2.4%, increasing the likelihood of a rate cut later this year. Energy futures continue drifting, unfazed.

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

Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

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