The Bulls Survived A Big Test On Monday

Market TalkTuesday, Nov 16 2021
Pivotal Week For Price Action

The bulls survived a big test Monday, bouncing sharply off of 6 week lows and continuing to rally overnight, putting the risk of a price collapse on hold for now, although weekly charts continue to favor a move lower by year end. 

Multiple refinery snags seem to have helped contribute to the sudden about-face in prices Monday, including reports that the country’s largest refinery was having to reduce production after a failed unit restart a month after an unplanned shutdown. The other indicator that the move was supply driven was that time spreads continued to strengthen, pushing several contracts into even steeper backwardation. 

Between the COP26 pledges and 2,700 page US “infrastructure” bill, there’s a lot of data to sort through this week that could theoretically at least impact energy markets. Based on the price action in petroleum futures, the early reaction from the market is that none of this is going to have much impact any time soon. Read here on how the funds from this new law will flow through state governments, starting 6 months from now.

One relatively small (you know, only $5 billion) piece of the bill signed yesterday will be good test for EV market, as it provides funds to buy battery powered school buses. How the industry can handle this process, whether or not those buses can even be produced any time soon, may go a long way to signaling the viability of the electric car dreams held by so many. Meanwhile, how to power those vehicles will certainly become a growing point of contention as coal prices in the US have reached a 12 year high

Supply chain snags are slowing the gains in US crude oil output, and helps explain why the drilling rig count haven’t jumped more with prices at 7 year highs. Here too the rapidly changing climate landscape may be playing a role, as a WSJ article this morning suggests that funding for US drillers will be more challenging after COP26, which may mark the end of decades of cheaper production.  Of course both points are welcome news to OPEC, who is already urging caution from producers as signs mount that the world is shifting to a crude surplus. 

Speaking of which, the IEA noted the rise in supply in its monthly oil market report. A few highlights from that report are included below. 

-The world oil market remains tight by all measures, but a reprieve from the price rally could be on the horizon. Contrary to hopes expressed in Glasgow at COP26 this is not because demand is declining, but rather due to rising oil supplies.

-Global oil production is already rising. In October, oil supplies leapt by 1.4 mb/d … A further boost of 1.5 mb/d is expected over November and December even as OPEC+ disregarded pleas from major consumers to ramp up beyond a monthly allocated 400 kb/d to cool prices. 

-Refinery activity is picking up after autumn maintenance, while end-user demand is on track to strengthen further as more countries open up to international travel

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

Market Talk Update 11.16.21

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Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures

The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.

The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.

We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.

The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.

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

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day

The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.

There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.

As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.

Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.

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

Pivotal Week For Price Action