Stock Markets And Energy Prices Moving Higher This Morning

Market TalkFriday, Nov 4 2022
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Stock markets and energy prices are both moving higher this morning following more reports that China is relaxing its COVID restrictions which would – theoretically at least – get the world’s 2nd largest economy back in growth mode.  October’s Jobs report is due out in a few minutes, but with the FED already making it clear that a pivot isn’t coming soon this week, that report may have less influence than normal. 

Correlations between energy and equity and currency markets have been fairly weak recently, but particularly for RBOB gasoline prices, they’ve been getting noticeably stronger over the past several sessions, and that news at least in part is contributing to the 9-cent gains in gasoline in the early going.

Reverse Cannon Ball run?  Diesel prices in LA are $1.40/gallon below those in New York today as diesel calendar spreads surged again Thursday and NYH premiums spiked north of 90 cents/gallon, while LA spots continue to wither.  NYH remains the outlier, trading at least 60 cents above all other US cash markets today, which should continue drawing barrels from far and wide, with strained capacity on pipelines, rail, trucks and vessels, steep backwardation, weather delays, and stiff competition from Europe being the only 7 limiting factors in resupplying the region.

California reported that diesel production in the state surged to a 2-year high last week, which was foreshadowed by basis prices for ULSD plummeting to a 50-cent discount to December futures earlier this week. Gasoline output went the opposite direction, with a large decline on the week, which was also foreshadowed by a rally in CARBOB basis values to a 60+ cent premium to futures.

Valero’s 290 mb/day refinery in Corpus Christi had multiple operating units shut by a fire Thursday, which was contained onsite without any injuries. While it’s unclear exactly which units were closed, or how long they may be offline, the Gulf Coast spot market seemed to shrug off the news, suggesting that event may either have minimal impact on operations or traders are just waiting to see how quickly restart commences.

The 180 million barrel sale of oil from the US Strategic Petroleum Reserve concluded Thursday, with the final 15 million barrels – which were announced last month as if they were a new release in a sign of the straw grasping taking place to deal with high energy prices – auctioned off, with deliveries scheduled in December.  It’s hard to argue that those sales of roughly 1 million barrels daily into the global market didn’t help cool down oil prices, but the question remains whether or not depleting half of the reserves will come back to bite us. 

The storm formerly known as Hurricane Lisa has made it into the Gulf of Mexico, but forecasts suggest the storm will not be able to regain its strength and rotation thanks to heavy wind shear in the area, which means the Gulf Coast refinery network may have dodged another bullet.   Meanwhile, Hurricane Martin is moving through the North Atlantic and is expected to weaken as it moves over that cold water, but still could bring damaging winds and rain to the UK.  2 other systems are still being tracked off of the SE US but given low odds of development.

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Market Talk Update 11-04-22

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Market TalkFriday, Jul 19 2024

Summertime-Friday-Apathy Trade Influencing Energy Markets

Energy markets are treading water to start the day as the Summertime-Friday-Apathy trade seems to be influencing markets around the world in the early going. RBOB futures are trying for a 3rd straight day of gains to wipe out the losses we saw to start the week, while ULSD futures continue to look like the weak link, trading lower for a 2nd day and down nearly 3 cents for the week.

Bad to worse: Exxon’s Joliet refinery remains offline with reports that repairs may take through the end of the month. On top of that long delay in restoring power to the facility, ENT reported this morning that the facility has leaked hydrogen fluoride acid gas, which is a dangerous and controversial chemical used in alkylation units. Chicago basis values continue to rally because of the extended downtime, with RBOB differentials approaching a 50-cent premium to futures, which sets wholesale prices just below the $3 mark, while ULSD has gone from the weakest in the country a month ago to the strongest today. In a sign of how soft the diesel market is over most of the US, however, the premium commanded in a distressed market is still only 2 cents above prompt futures.

The 135mb Calcasieu Refinery near Lake Charles LA has been taken offline this morning after a nearby power substation went out, and early reports suggest repairs will take about a week. There is no word yet if that power substation issue has any impacts on the nearby Citgo Lake Charles or P66 Westlake refineries.

Two tanker ships collided and caught fire off the coast of Singapore this morning. One ship was a VLCC which is the largest tanker in the world capable of carrying around 2 million barrels. The other was a smaller ship carrying “only” 300,000 barrels (roughly 12 million gallons) of naphtha. The area is known for vessels in the “dark fleet” swapping products offshore to avoid sanctions, so a collision isn’t too surprising as the vessels regularly come alongside one another, and this shouldn’t disrupt other ships from transiting the area.

That’s (not) a surprise: European auditors have determined the bloc’s green hydrogen goals are unattainable despite billions of dollars of investment, and are based on “political will” rather than analysis. Also (not) surprising, the ambitious plans to build a “next-gen” hydrogen-powered refinery near Tulsa have been delayed.

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Market TalkThursday, Jul 18 2024

Refined Products Stanch Bleeding Despite Inventory Builds And Demand Slump

Refined products are trading slightly lower to start Thursday after they stopped the bleeding in Wednesday’s session, bouncing more than 2 cents on the day for both RBOB and ULSD, despite healthy inventory builds reported by the DOE along with a large slump in gasoline demand.

Refinery runs are still above average across the board but were pulled in PADD 3 due to the short-term impacts of Beryl. The Gulf Coast region is still outpacing the previous two years and sitting at the top end of its 5-year range as refiners in the region play an interesting game of chicken with margins, betting that someone else’s facility will end up being forced to cut rates before theirs.

Speaking of which, Exxon Joliet was reportedly still offline for a 3rd straight day following weekend thunderstorms that disrupted power to the area. Chicago RBOB basis jumped by another dime during Wednesday’s session as a result of that downtime. Still, that move is fairly pedestrian (so far) in comparison to some of the wild swings we’ve come to expect from the Windy City. IIR via Reuters reports that the facility will be offline for a week.

LA CARBOB differentials are moving in the opposite direction meanwhile as some unlucky seller(s) appear to be stuck long and wrong as gasoline stocks in PADD 5 reach their highest level since February, and held above the 5-year seasonal range for a 4th consecutive week. The 30-cent discount to August RBOB marks the biggest discount to futures since 2022.

The EIA Wednesday also highlighted its forecast for rapid growth in “Other” biofuels production like SAF and Renewable Naptha and Propane, as those producers capable of making SAF instead of RD can add an additional $.75/gallon of federal credits when the Clean Fuels Producer’s Credit takes hold next year. The agency doesn’t break out the products between the various “Other” renewable fuels, but the total projected output of 50 mb/day would amount to roughly 2% of total Jet Fuel production if it was all turned to SAF, which of course it won’t as the other products come along for the ride similar to traditional refining processes.

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Pivotal Week For Price Action