RIN Trading Adding To The Strong Rally To End June With Both D4 And D6 Prices Reaching A Fresh 2-Month High
Refined product futures dropped sharply on Monday, but you may never know it since spot markets east of the Rockies were essentially closed for the day, and futures are rallying this morning to wipe out those losses. Looking at price's vs Friday’s settlement, ULSD prices are up a couple of cents so far on the week, while gasoline prices are down a few cents.
West Coast spot markets were still assessed, so buyers in those regions did get a two-day discount that they’ll be racing to take advantage of today as long as the recovery rally continues.
The Saudi-Russian output cut announcement from Monday has had little influence so far with WTI and Brent prices up just around $1/barrel from their end of June levels.
Weak manufacturing data from the US and China were getting credit for the earlier selling, with the jobs report Friday getting a lot of chatter as the market prepares to bet on the next FED rate hike.
Toyota announced a major breakthrough in its battery technology over the weekend, with ambitious claims of halving costs and charging times while doubling range for EVs. Read this FT article that gives the headlines a reality check.
While most spot markets took the day off Monday, RIN trading was active, adding to the strong rally we saw to end June with both D4 and D6 prices reaching a fresh 2 month high, and erasing the heavy losses seen in the immediate wake of the EPA’s volume targets 2 weeks ago. While many focused on the EPA’s lowering of the ethanol blend requirement, much to the chagrin of food to fuel producers, some refiners are arguing (aka complaining) that this leaves a blend percentage at unreachable levels north of 10%, which will keep RIN prices high.
Canada’s clean fuel standard started in July and will ramp up requirements for biofuels over the next few years in order to meet increasingly stringent emissions requirements. While the program’s targets aren’t aggressive over the next 18 months or so, they are already creating some competition for US biofuel supplies.
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.