Refined Product Futures Drift Higher After Monday's Abbreviated Trading Session
Energy futures held onto most of their gains through Monday’s abbreviated holiday trading session, and thus started Tuesday’s session with nickel gains for distillates and 4 cents for gasoline.
There’s not much in the way of news moving prices so far this morning, with US equities pointing to a lower open while the US dollar is seeing modest gains with many headlines still obsessing over future interest rate policy.
Brent Crude, which was open for a regular trading session Monday, is seeing a modest pullback today after reports that Russian oil exports surged ahead of the country’s self-imposed oil production cuts.
Russia also said today it is suspending participation in its nuclear arms treaty with the US, in a sign of retaliation for the US president’s visit to Kiev Monday. Separately, flows of Kazakh crude oil pledged to Germany through a Russian pipeline system have been delayed, without any reasons given, which could be just the latest swing of Russia’s shrinking energy sword.
The CFTC announced it would start trying to catch up on its 3 weeks of missing COT reports this Friday, starting by publishing the report that was originally scheduled for February 3rd, and then expediting the other two reports if all goes well.
New idea or the same old scam? United airlines and 5 corporate partners are launching a venture capital fund that will invest in companies developing SAF. Never one to pass up a shameless plug, the airline said it will allow customers to donate to the fund in exchange for 500 frequent flier miles. SAF development is getting more focus thanks to last year’s “Inflation creation Reduction Act” that offers $1.25/gallon in tax credits for SAF plus 1 cent per % point of reduction in greenhouse gas emissions below 50% of traditional fuels. This credit is notably higher than the credits offered for Bio and Renewable diesel products that are competing for the same feedstocks and processing assets, leading many to believe that the development of SAF will be to the detriment of the on-road fuels.
The IEA issues another scolding to the oil and gas sector today in its latest Global Methane Tracker that suggests companies continue coming up short in efforts to curb emissions despite improving economics to do so. In recent weeks we’ve seen Exxon Mobil end a decade-long effort to develop algae as a renewable fuel source, and BP take a big step back from its emissions targets as the oil majors have apparently decided that they’ll continue acting like oil companies as long as the money is good.
Click here to download a PDF of today's TACenergy Market Talk.
Click here to read: February 20, 2023 Presidents Day 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.