Refined Products Seeing Minimal Gains On Light Volume While Crude Oil Prices See Small Losses

March trading is coming in like a lamb with refined products seeing minimal gains on light volume while crude oil prices see small losses in the early going.
China’s manufacturing saw its fastest increase in a decade February as the country rapidly reopened from COVID in one of the key early indicators of the economic activity in the world’s largest buyer of oil. The lack of reaction in oil or product prices to this news suggests that the market may have been expecting even more.
The API reported another large crude oil build of 6 million barrels last week, a third straight week of large increases despite no barrels being released from the SPR during that time. Refined products saw declines of 1.7 million barrels for gasoline and 341k for distillates in the API figures. The EIA has been showing huge builds also, but isn’t sure where they came from, listing more than 2 million barrels/day of “adjustments” to its inventory levels in the past 2 weeks. Their weekly update is due out at its normal time this morning.
Looking at the April RBOB contract chart (not the continuous RBOB chart that shows the prompt contract each month) we’re already seeing two layers of chart resistance (barriers to prices moving higher) to start the month. There is both a trend line that slants lower from the January highs of $2.85, and comes in today right around $2.65, and the 200 day Moving Average which comes in at $2.6580. If the April contract can settle above those values, the door is open for a 20 cent increase with only a speed bump in the low $2.70s offering resistance near term. If they fail to break those resistance levels however, there’s a good chance we could see slide towards the February low of $2.46, which would also come close to filling the chart gap left behind on the continuous chart from the change for March to April.
ULSD charts don’t seem to have nearly as much potential upside as RBOB, as the 3rd bounce off of $2.66 over the past month is already looking like it may have run out of steam. Colder weather forecast in March, and the potential for a gasoline rally could both help ULSD find buyers again in the coming weeks, but if prices do slide below $2.66, there’s at least 20 cents to fall near term and a slide all the way to $2 can’t be ruled out.
The EIA’s monthly crude oil and natural gas production report showed that domestic production dropped for both in December, marking the first declines in a year as producers struggled with plummeting prices and the big freeze at the end of the month. Stagnant rig counts, and prices dropping further so far in 2023 suggest we may not see those output levels rebound for a while.
A worker at Marathon’s Galveston Bay refinery died after being electrocuted Tuesday. It’s not clear what caused the accident, or if it will impact operations at the facility. That refinery that has an unfortunate track record for worker deaths, most notably the explosion that killed 15 and injured 180 when it was known as BP Texas City 15 years ago. No wonder Marathon changed the name after acquiring it.
Click here to download a PDF of today's TACenergy Market Talk.
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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.

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.
