Refined Products Bounced 8-10 Cents Off Of Their Monday Lows To Reach Fresh 7 Year Highs
The Russian rollercoaster continues this week as refined products bounced 8-10 cents off of their Monday lows to reach fresh 7 year highs, only to drop 8-10 cents this morning as the market tries to guess whether or not there will be an invasion of Ukraine. Reports overnight that Russia had moved some troops back from the border are getting credit for the big selloff in petroleum (and the big rally in stocks) while other reports suggest that an invasion is still likely and NATO’s leadership suggests it has not yet seen real signs of de-escalation.
On the weekly charts today’s drop barely registers, with both RBOB and ULSD futures down just a couple of cents for the week so far thanks to yesterday’s late rally, keeping the bullish trend line intact. We’ll need to see another 7-8 cents of losses before that trend breaks – which it will at some point – and opens the door for a quick 20 cent drop. In the meantime, if prices hold again like we saw early last week, this selloff just helps to cure the overbought technical condition and paves the way for a continued rally that will have refined products north of $3 and crude north of $100.
More bad news for ethanol? While the EPA is reviewing the RFS, a new study released Monday suggests that ethanol may be notably worse for the environment than gasoline. The study argues that previous reports from the USDA fail to recognize the negative impact of land use changes to create more ethanol. Not surprisingly, that study was quickly refuted by biofuel groups. Ethanol and RIN prices didn’t seem to react much to the report, as it’s unlikely any congressional changes will be made in the near future.
Click here to download a PDF of today's TACenergy 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.