Smorgasbord Of Bullish Headlines Pushed Energy Complex Higher
A smorgasbord of bullish headlines has pushed the energy complex higher this week, this morning being no different. Rising tensions with Iran, the last update having the White House call an air strike then cancel, equities reaching record highs on dovish monetary policy, and now a massive explosion and fire at PES’s south Philadelphia refinery has prices rallying to monthly highs.
So far there are no injuries reported as a result of the malfunction which is quite surprising given the sheer size of the explosion. Philadelphia Energy Solution’s complex is the largest of its kind on the East Coast, capable of producing 335mb per day, and NYMEX prices are reacting accordingly. There hasn’t been any physical product trading reported so far this morning but prompt month gasoline futures have rallied over 7.5 cents in early morning trading with diesel futures ‘lagging behind’ and only adding 4 cents.
The three alarm fire is reported to have been contained, no update yet on damage or estimated repair time. Since the issue originated in the complex’s butane vat, the refinery’s downtime might not be as long as one would imagine with an explosion that could be felt in neighboring states.
Prices have pulled back slightly from their highs today but have blown through yet another technical resistance level this week. Both gas and diesel settled higher than their respective 20-day moving averages yesterday and have overtaken their more significant 100-day averages with this morning’s buying. Finishing the week above that level leaves prompt month contracts technically open at add another dime next week. However, bearish fundamentals, especially if this morning’s events turns out to be more bark than bite, could temper buyer enthusiasm.
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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.