Snapping A Six Day Win Streak

Market TalkFriday, May 22 2020
End To A Choppy Week For Energy Prices

The energy rally finally looks like it’s run out of steam temporarily with lower values across the board, which would snap a six day win streak for WTI. With little in the way of news, and low volumes suggesting many have already started a four-day weekend, this move lower screams of profit-taking rather than the end of the upward trend.

There is some concern that prices have out-kicked their coverage as U.S. fuel demand remains 20 percent or more off normal levels for this time of year, and charts are showing another rounding top pattern that could mean another sharp selloff to end the month.

Today is often one of the busiest demand days of the year for gasoline as stations prepare for the holiday rush, and the weekend that unofficially kicks off the summer driving season. This year is unlike any before it for U.S. driving demand, but there continue to be plenty of signs that things are slowly improving on that front.

Apple’s mobility data reports continue to show steady improvement in driving activity, while public transit continues to lag far behind. Google’s mobility reporting parses the data into different categories, but shows a similar pattern with demand for driving to residences and parks now higher than pre-COVID-19 levels, while travel to workplaces is still down 24 percent and transit stations are down 34 percent.

While the increase in driving demand so far in May is allowing refiners to begin ramping rates back up, it isn’t yet doing much to help their overall margins as the rally in crude largely driven by the collapse of the super-contango in WTI is pushing crack spreads lower and diesel – which for years has been helping prop up margins, is now dragging them lower.

As if those refiners didn’t have enough to worry about already this year. NOAA is predicting a busy Atlantic Hurricane season, with up to 19 named storms, and potentially six major hurricanes, similar to the devastating 2005 season that wreaked havoc on the country’s energy infrastructure. On the bright side, if a storm does target the Gulf Coast, those events typically bring a boost to margins for any plants that can continue operating.

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

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Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Nov 29 2023

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.

Pivotal Week For Price Action
Market TalkTuesday, Nov 28 2023

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.