Severe Weather Across Large Parts Of The Country, The NHC Is Giving 50% Odds Of A Tropical System Being Named Over The Eastern Atlantic In The Coming Days
ULSD is leading the energy complex higher after breaking out above the sideways trading range that had held prices the past 7 weeks and is currently holding gains of nearly 15 cents/gallon for the week. If the bulls can maintain the upward momentum and settle above $2.50 today, there’s a strong case to be made on the charts that we’ll soon see prices run up to the 2.60-2.70 range that held prices for about a month this spring.
Values to ship gasoline on Colonial’s line 1 collapsed Thursday after reports of an upset at Exxon’s Baytown refinery, as traders seem be to anticipating a shortage at one of the largest origin points on the pipeline, even though USGC basis values didn’t move much on the news. Meanwhile, Marathon’s Texas City refinery (aka Galveston Bay) refinery continues to have challenges a month after another deadly fire broke out at the facility, with two more unit upsets reported to the TCEQ this week.
California carbon allowances (CCA) prices continue to rally to their highest levels of the year following a workshop Wednesday where regulators presented their intentions to promote tighter requirements and higher credit values. There is now a 3 week window for stakeholders to provide feedback on the revised plan before it moves into the formal rulemaking stages. Interestingly enough, California’s LCFS credit values have dropped near a 2-month low, demonstrating the difference between a market-based credit system that’s incentivized a huge influx of renewable fuel production, and the Cap & trade program that just makes up the amount of credits they’ll sell.
So far there are no reports of damage to energy supply infrastructure from the wave of severe storms sweeping across the southern US this week. So far there are no reports of upsets from either of the 2 TX Panhandle refineries following last night’s deadly tornado in Perryton TX, which is roughly 75 miles northeast of those facilities, although Valero’s McKee facility did report an upset due to thunderstorms Tuesday night and the Borger facility continues to work on repairs after being damaged in the Christmas blizzard.
Besides the outbreak of severe weather across large parts of the country, the NHC is giving 50% odds of a tropical system being named over the eastern Atlantic in the coming days. This system is currently moving off the west coast of Africa and has an early path that could allow it to threaten the US (in an area that’s developed some of the largest storms on record) so will need to be watched. It is rare for a storm to develop in this area so early in the season, with only 3 storms ever forming in this region in June, but with waters already at record warm temperatures, don’t expect this season to follow the script.
It's Another Mixed Start For Energy Futures This Morning After Refined Products Saw Some Heavy Selling Wednesday
Week 8 - US DOE Inventory Recap
It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day
The Latest Warmer-Than-Expected Winter Has Driven Natural Gas Prices To The Lowest Level Seen Since The NG Futures
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It's another mixed start for energy futures this morning after refined products saw some heavy selling Wednesday. Both gasoline and diesel prices dropped 7.5-8.5 cents yesterday despite a rather mundane inventory report. The larger-than-expected build in crude oil inventories (+4.2 million barrels) was the only headline value of note, netting WTI futures a paltry 6-cent per barrel gain on the day.
The energy markets seem to be holding their breath for this morning’s release of the Personal Consumption Expenditures (PCE) data from the Bureau of Economic Analysis (BEA). The price index is the Fed’s preferred inflation monitor and has the potential to impact how the central bank moves forward with interest rates.
Nationwide refinery runs are still below their 5-year average with utilization across all PADDs well below 90%. While PADD 3 production crossed its 5-year average, it’s important to note that measure includes the “Snovid” shutdown of 2021 and throughput is still below the previous two years with utilization at 81%.
We will have to wait until next week to see if the FCC and SRU shutdowns at Flint Hills’ Corpus Christi refinery will have a material impact on the regions refining totals. Detail on the filing can be found on the Texas Commission on Environmental Quality website.
Update: the PCE data shows a decrease in US inflation to 2.4%, increasing the likelihood of a rate cut later this year. Energy futures continue drifting, unfazed.
Week 8 - US DOE Inventory Recap
It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.
The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).
OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.
How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).
The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.