Selloff Stretches To A Sixth Straight Day

Market TalkThursday, Aug 19 2021
Pivotal Week For Price Action

Several energy contracts have dropped to 3 month lows this morning as the selloff stretches to a 6th straight day. The main driver of the big move today is an apparent taper tantrum as the FED telegraphs an end to its most recent round of money printing. A secondary catalyst seems to be the fallout from two tropical storm systems reaching the major population centers along the East Coast that may keep many drivers off the road, at a time when it’s already looking like domestic consumption is heading lower.

Energy futures were already looking like they may be due for a big move lower prior to the FED minutes release, and the selloff in equities seems to be adding to the negative sentiment even though the correlation between daily price movements in the two asset classes had broken down in recent weeks. Whenever FED stimulus is a market driver, we experience the strange “Good news is bad news” phenomenon. Yesterday was no different when the FOMC minutes suggested that the Delta variant won’t derail economic recovery in the US (Good news!) which means the FED has less reason to keep injecting money into the system (Bad news for investors wall street bankers!)

As the remnants of TS Fred dump heavy rain across large parts of the country, Henri has gone from an afterthought to a real threat as forecasts continue to shift the storm west. 2 days ago there was no threat to land, and now the New York harbor is showing up in some models, while the terminals from New Haven, Providence and Boston are now all in the forecast cone, suggesting the waterborne deliveries that region relies on are likely to face some disruption over the next few days. The good news is the handful of remaining refineries operating in the region are not in the forecast cone, and Colonial pipeline has spare capacity, which should help keep any supply disruptions contained.

Now that the July lows have been taken out for WTI and ULSD (and will be for RBOB once we roll to winter-specs in 2 weeks) the next stopping points on the charts look like the March lows. That means downside targets $57 for WTI, $1.73 for ULSD and $1.87 for RBOB.

Not much to write about from yesterday’s DOE report, and it didn’t seem to have much influence on the crescendo of selling. Diesel demand continues to look strong, holding above its 5 year range, while gasoline demand looks like it may have made its seasonal turn, and dropped back below its 5 year seasonal range.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the weekly DOE Report.

Market Update (01C) 8.19.21

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Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

Click here to download a PDF of today's TACenergy Market Talk.

Pivotal Week For Price Action
Market TalkTuesday, Mar 26 2024

Refined Products Seeing Small Losses Of Around A Penny While Crude Oil Contracts Hover Just Above Break Even

Energy futures are taking a breather to start Tuesday’s trading, with refined products seeing small losses of around a penny while crude oil contracts hover just above break even.

No new news on either the Red Sea shipping or Russian Refining attacks this morning, so Cocoa prices seem to be taking over the commodity headlines while energy markets wait on their next big move.

RBOB gasoline futures set a new 6-month high Monday at $2.7711, which leaves the door open on the weekly charts for the spring rally to continue. A run at the $3 mark is certainly possible in the next few weeks before the typical seasonal price peak is set just before the start of driving season.

A container ship lost power and crashed into the Francis Scott Key bridge in Baltimore this morning, causing a devastating collapse. While cargo shipping into the area will no doubt be impacted by this event, fuel supplies are unlikely to see any notable change since the 9 fuel terminals in Baltimore are primarily supplied by Colonial pipeline. Barges from Philadelphia refineries do supplement Baltimore supplies at times, and those vessel flows will be impacted at least until rescue operations are completed and the bridge sections removed from the waterway. That said, since shipping up from the Gulf Coast via Colonial is generally cheaper than shipping an NY Harbor-priced barrel south, the amount of supply disrupted by this event will be minimal.

While we’re still waiting on the official forecasts for the Atlantic Hurricane season, early reports continue to suggest that we could be in for a very busy year due to warm water temperatures and a forming La Nina pattern.

Dallas meanwhile is preparing for a different sort of disruption, with city officials encouraging companies to let employees work from home during the solar eclipse on April 8th as metroplex traffic is expected to surge. While some isolated fuel outages are certainly possible if people start panic buying gasoline they don’t need, there’s no reason to expect any widespread impact from the demand spike.

Today’s interesting read: Why AI requires a staggering amount of electricity and may create supply competition for EVs that will end up benefitting fossil fuels.

Click here to download a PDF of today's TACenergy Market Talk.