The Energy Complex Is Taking A Breather This Morning
The energy complex is taking a breather this morning with the big three US benchmarks posting >1% losses to start today’s trading session. Both gasoline and diesel futures are down around 3.5 cents so far today while the prompt month crude oil contract leads the way lower trading ~$1.50 per barrel under yesterday’s settlement.
Despite the buying action seen since the bullish weekly inventory report was published on Wednesday, the September WTI contract is poised to end the week lower as concerns surrounding the not-recession remain. A strong US dollar and weak equity performance are also cited as reasons for crude oil futures maintaining the bearish trend it’s been in since prices hit highs over $120 per barrel back in June.
The spread between New York Harbor and Gulf Coast gasoline prices remains at the highest levels in recent memory, even after it’s dropped 26 cents from last month. Refiners are pushing as much product as they can up to the northern Atlantic coast, but the practical avenues of moving product from refining country to the tri-state area are limited. With the premium over shipping costs on the Colonial Pipeline going ballistic, producers are exploiting a well-known loophole to resupply the tri-state area.
The system the National Hurricane Center has been tracking this weak crossed over into the Gulf of Mexico overnight, and is now given a 40% chance of cyclonic organization in the next 48 hours. While it is expected to form into a tropical depression later today or early tomorrow morning, the Center expects it to make landfall somewhere in northeastern Mexico and cease development, sparing the refining heart of the US in Houston.
Click here to download a PDF of today's TACenergy Market Talk.
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Week 48 - US DOE Inventory Recap
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.
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.