The Choppy Trading Continues In Energy Markets

Market TalkTuesday, Jul 5 2022
Pivotal Week For Price Action

The choppy trading continues in energy markets with another round of selling welcoming US traders back after the holiday, after a big Friday rally managed to salvage the bull market, temporarily at least. For now the energy complex seems trapped in a conundrum with Supply shortages keeping prices elevated while recession fears preventing them from running rampant. 

ULSD futures look the weakest on the charts, still trading below the weekly trend-line that carried them from the $2 level in December despite Friday’s big bounce. Peg last week’s low just above $3.81 as must-hold support to prevent a slide to $3.50.  RBOB prices look less bearish after Friday’s big recovery rally, but are still teetering on the edge of their weekly trend-line, with a slide to $3 a possibility if the buyers don’t step back in soon.

Money managers were liquidating long positions in ULSD, Gasoil and Brent contracts last week, but adding to positions in RBOB and WTI. A large number of new short bets were placed on RBOB contracts, suggesting that funds are starting to see the potential for an end to the gasoline price rally, although there are still nearly 8 to 1 bets on higher prices vs lower prices in the large speculator category. Open interest across the petroleum complex remains at 5+ year lows.

Baker Hughes reported a net increase of 1 oil rig drilling in the US last week, while natural gas rigs declined by 4. That marks the largest weekly decline in Natural Gas rigs since August of last year, and is a bit surprising given the renewed interest in US natural gas to try and help ease the energy supply crunch in Europe and other parts of the world. Speaking of which, a Bloomberg article today highlights why the global natural gas trade is more important than ever

Bonnie made landfall in central America as a tropical storm, but has reformed as a Hurricane in the Eastern Pacific, adding another odd phenomenon to the weather history books.  Speaking of which, tropical storm Colin came and went off the Carolina Coast over the weekend, surprising the National Hurricane Center which had been tracking 3 other systems, but not that one until it was already formed. No other storms are on the NHC radar for development in the next 5 days, which is good news for Gulf Coast refiners who are running at their hottest pace in 3 years.

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

Market Talk Update 7.05.22

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Pivotal Week For Price Action
Market TalkThursday, Mar 28 2024

Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

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
Pivotal Week For Price Action
Market TalkWednesday, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

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