Refined Products Are Seeing A Modest Pullback This Morning After A Furious 2-Day Rally To Start The Week

Market TalkWednesday, Oct 5 2022
Pivotal Week For Price Action

Refined products are seeing a modest pullback this morning after a furious 2-day rally to start the week. The moves in futures have mirrored the moves in stock markets which are also seeing some modest selling after one of the largest 2-day rallies on record.   

The two most powerful cartels influencing energy markets are OPEC and the US federal reserve, and expectations for both seem to be having a big influence on the price action this week even though neither one has yet made any official announcements. 

OPEC and friends are holding their first in person meeting in 2 years today, and there have been widespread reports that the cartel is planning a large production cut, despite pressure by the US to keep production high. The reality that OPEC is undershooting its production target by more than 1.3 million barrels/day suggests that an announced cut less than that amount may mean actual production will increase.

Want some evidence that we’re back in a “bad news is good news” market?  Yesterday the apparent catalyst for the biggest rally in stock markets in 2 years was a large and wide-spread drop in job openings in the US, which apparently had many thinking the FED pivot from its explicitly hawkish monetary policy sooner than previously expected. If that logic sounds shaky to you, you’re certainly not alone, and at some point the demand fears may come creeping back as traders remember that fewer jobs equates to fewer vehicles on the road and less real money to buy things.

While gasoline basis values in several markets were continuing their return to reality, diesel differentials saw more strength, leading to a rare occurrence where every major spot market in the US was trading at a premium to ULSD futures. 

Strong cash markets around the country seemed to be foreshadowing tighter inventories, and that’s exactly what the API showed Tuesday afternoon with gasoline stocks declining by 3.5 million barrels and diesel dropping by 4 million barrels. The report also estimated that crude oil inventories dropped by 1.8 million barrels despite the ongoing release of oil from the SPR.  

The DOE’s weekly report is due out at 9:30 central. The strength we’ve seen in basis, calendar and crack spreads in the past two weeks suggests that refineries are struggling to increase production, making refinery output an important figure to watch today.

Today’s interesting read: How a new deal between Israel and Lebanon could be a game changer for European Natural gas supplies…eventually. 

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

Market Talk Update 10.05.2022

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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.

Pivotal Week For Price Action