Refined Products Set Fresh Multi-Month Highs In Another Strong Session For The Bulls Thursday
Refined products set fresh multi-month highs in another strong session for the bulls Thursday and have resumed that push higher this morning after a brief pullback overnight.
August RBOB futures reached $2.9679 this morning, the highest level since October of last year. It seems like we’ll see at least an attempt to try and push those values to $3 ahead of the contract expiration on Monday, before the roll to the September contract knocks about 7 cents off of the prompt values. The strength in futures and time spreads this week has come in spite of weakness in NYH basis differentials and Colonial linespace values as PADD 1 refinery runs quickly recovered after the extended downtime at the Bayway refinery.
ULSD futures are trading at their highest level since Valentine’s Day touching $2.9338 in the early going, which opens up a similar window for a push towards $3 just like RBOB. Unlike RBOB however, physical buyers seem to be jumping on the diesel bandwagon with stronger basis values seen across most of the country, and less backwardation in the forward curve means prompts values will drop just a penny or two after Monday’s expiration.
While refined products are celebrating a summer renaissance, ethanol values are heading the opposite direction, dropping by 25 cents this week on the back of weaker corn prices. The diverging price patterns has pushed the premium for gasoline vs ethanol (net of RIN values) north of $2/gallon.
We are still about 6 weeks away from the peak of hurricane season, but the NHC is tracking 3 different potential storm systems this morning, 2 of which could be threats for the east coast. The good news is 2 of the 3 systems are given low odds of development and are already close to shore giving them little chance to develop into something meaningful. The third system is given 60% odds of being named next week and is far enough north and east that it may stay offshore, but there is a possibility of some disruption along the Eastern Seaboard as it moves north.
There’s a common theme among the refiner Q2 earnings releases this week: The 2nd quarter of 2023 was nowhere near as strong as the record smashing margin environment they enjoyed a year ago, but margins are still pretty good given low inventory levels and recovering demand. The reports are also confirming what many on the West Coast already knew, that renewable diesel production has surged in the past 6 months and created a rapidly changing environment for the diesel marketplace as both the new renewable barrels and the old traditional diesel barrels all look for new homes.
Click here to download a PDF of today's TACenergy Market Talk.
Latest Posts
The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
Week 39 - US DOE Inventory Recap
Crude Oil Futures Are Leading The Energy Complex Higher This Morning With WTI Jumping 2% And Exchanging Hands Above The $92
Social Media
News & Views
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.