The Energy Complex Is Selling Off Once Again This Morning As Gasoline Futures Lead The Way Lower

Market TalkThursday, May 19 2022
Pivotal Week For Price Action

The energy complex is selling off once again this morning as gasoline futures lead the way lower. The prompt month RBOB contract is currently showing 3.5% losses as the oils (heating and crude) trail closely, trading lower by 2.5%. Futures traders seem to be shrugging off the report published by the Department of Energy yesterday which showed a sizeable drawdown in national gasoline inventories. This latest drop in stockpiles only exacerbated the tight gasoline landscape, especially in PADD 1, which contains the New York market, the physical delivery point of the globally traded futures contract.

Market participants could be referencing the increase in crude production as their justification for selling oil in the middle of a shooting war. Even though national oil inventory is still at 5-year seasonal lows, optimism surrounding the steadily increasing number of active production rigs might be enough to convince some ‘help is one the way’ and/or ‘the worst is over’.

Diesel basis markets were relatively quiet yesterday as some take a wait and see approach to valuing the physical markets. The increase in national diesel inventories, combined with the across-the-board bump in refinery run rates for all PADDs, pushed the prompt-second month HO spread below 10 cents for the first time since March yesterday.

Technical (technical) breakdown? Momentum trading spurred by a grim global demand outlook and a coincidental(?) drop in equities markets seem to be taking credit for today’s selloff. The ‘big three’ American energy benchmarks are breaking or already trading lower than a few of their respective moving averages, signaling that lower prices may be coming in the short term. If today’s action holds, refined product futures charts show little support between current levels and the $3.30s. Crude oil, on the other hand, has a test at the $105 level but if that’s broken, a drop to $100 seems likely.

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

Market Talk Update 05.19.22

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Pivotal Week For Price Action
Market TalkThursday, Feb 29 2024

It's Another Mixed Start For Energy Futures This Morning After Refined Products Saw Some Heavy Selling Wednesday

It's another mixed start for energy futures this morning after refined products saw some heavy selling Wednesday. Both gasoline and diesel prices dropped 7.5-8.5 cents yesterday despite a rather mundane inventory report. The larger-than-expected build in crude oil inventories (+4.2 million barrels) was the only headline value of note, netting WTI futures a paltry 6-cent per barrel gain on the day.

The energy markets seem to be holding their breath for this morning’s release of the Personal Consumption Expenditures (PCE) data from the Bureau of Economic Analysis (BEA). The price index is the Fed’s preferred inflation monitor and has the potential to impact how the central bank moves forward with interest rates.

Nationwide refinery runs are still below their 5-year average with utilization across all PADDs well below 90%. While PADD 3 production crossed its 5-year average, it’s important to note that measure includes the “Snovid” shutdown of 2021 and throughput is still below the previous two years with utilization at 81%.

We will have to wait until next week to see if the FCC and SRU shutdowns at Flint Hills’ Corpus Christi refinery will have a material impact on the regions refining totals. Detail on the filing can be found on the Texas Commission on Environmental Quality website.

Update: the PCE data shows a decrease in US inflation to 2.4%, increasing the likelihood of a rate cut later this year. Energy futures continue drifting, unfazed.

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, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

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