Rollercoaster Ride Continues For Energy And Equity Markets
The rollercoaster ride continues for energy and equity markets following Wednesday’s FOMC announcement. Energy futures gave back all of Wednesday’s gains overnight, but have bounced sharply off of their overnight lows.
It seems that stock markets did not like the FED’s signals that it planned to hike interest rates 2 more times in 2019, after announcing its 4th increase of 2018 in yesterday’s statement. Even though this is lower than previous forecasts of 3-4 interest rate hikes next year, based on the price reaction, it appears many were hoping (and/or betting) for an end of the increases as signs of a global economic slowdown are numerous.
So where to from here? From a chart perspective we need to see prices get back above their previous support to break the potential bearish reverse-flag pattern. For WTI that means getting back above $50, for Brent $60. RBOB gasoline futures need to get north of $1.40 and ULSD needs to break above $1.80 in order to reduce the likelihood of another big sell-off.
Notes from the DOE weekly report:
Good news for US refiners: The DOE’s weekly demand estimate for distillates reached a 15 year high north of 4.8 million barrels/day. The bad news? That’s still 500,000 barrels/day less than the amount of diesel produced each day last week, even with a decline in weekly production.
The (potentially) ugly news for diesel consumers? At 24 days of forward cover, diesel inventories are at their lowest levels since 2008 (when diesel futures surpassed $4/gallon) leaving the market susceptible to price shocks in the coming year, particularly as we get closer to the deadline for the IMO Marine diesel spec change.
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Week 48 - US DOE Inventory Recap
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Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
After Another Black Friday Selloff Pushed Energy Futures Sharply Lower In Last Week’s Holiday-Shortened Trading
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Week 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Gasoline and oil prices are attempting to rally for a 2nd straight day, a day ahead of the delayed OPEC meeting, while diesel prices are slipping back into the red following Tuesday’s strong showing.
The API reported gasoline inventories dropped by 898,000 barrels last week, crude inventories declined by 817,000 barrels while distillates saw an increase of 2.8 million barrels. Those inventory stats help explain the early increases for RBOB and WTI while ULSD is trading lower. The DOE’s weekly report is due out at its normal time this morning.
A severe storm on the Black Sea is disrupting roughly 2% of the world’s daily oil output and is getting some credit for the bounce in futures, although early reports suggest that this will be a short-lived event.
Chevron reported that its Richmond CA refinery was back online after a power outage Monday night. San Francisco spot diesel basis values rallied more than a dime Tuesday after a big drop on Monday following the news of that refinery being knocked offline.
Just a few days after Scotland’s only refinery announced it would close in 2025, Exxon touted its newest refinery expansion project in the UK Tuesday, with a video detailing how it was ramping up diesel production to reduce imports and possibly allow for SAF production down the road at its Fawley facility.
Ethanol prices continue to slump this week, reaching a 2-year low despite the bounce in gasoline prices as corn values dropped to a 3-year low, and the White House appears to be delaying efforts to shift to E15 in an election year.
Click here to download a PDF of today's TACenergy Market Talk.
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.