The July Rollercoaster Continues

Market TalkMonday, Jul 12 2021
Pivotal Week For Price Action

The July rollercoaster continues: We hit 6 year highs, then saw products drop 16 cents in 2 days, only to wipe out almost all of those losses the next 2 days with a strong finish Friday, only to see more selling pressure this morning. US equity markets are also pointed lower after touching fresh record highs last week, with the common culprit of COVID concerns being blamed for the selling in both asset classes. 

Throwing in the towel? Money managers made sizeable reductions in their net length across the petroleum complex last week, after weeks of steady buying had pushed the large-speculator’s bets on higher prices at multi-year highs. The timing of the report data (which is compiled using Tuesday’s positions, and reported on Friday) coincides with the heavy selling we saw early in the week, before the big price bounce Wednesday, so it will be interesting to see if they tried to jump back on the bandwagon later in the week, or if this is the start of a larger liquidation that could help bring an end to the 8 month-long price rally.

While petroleum wagers subsided, money managers continued to increase their net length in California Carbon Allowances last week, which appears to be driving the increase in those CCA credits to new all-time highs. 

Baker Hughes reported 2 more oil rigs were put to work last week, both of which came in “other” smaller shale plays that don’t get their own classification, while the Permian Basin (which accounts for more than half of all drilling activity in the country) held steady for a 3rd week. With oil prices reaching 6 year highs last week, there will be more focus on the rig count over the next several weeks as US producers engage in a high stakes game of chicken with OPEC producers to see who wants to bring their spare capacity back into the game while risking popping the oil price bubble.

Remember when the IMO 2020 fuel specification change was expected to wreak havoc on global diesel supplies, before COVID made that idea seem quaint? We may be in for version 2.0 of that phenomenon as the EU gets ready to announce major changes to its carbon market this week, which could mean more overhauls for shippers

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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.

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Pivotal Week For Price Action
Market TalkTuesday, Mar 26 2024

Refined Products Seeing Small Losses Of Around A Penny While Crude Oil Contracts Hover Just Above Break Even

Energy futures are taking a breather to start Tuesday’s trading, with refined products seeing small losses of around a penny while crude oil contracts hover just above break even.

No new news on either the Red Sea shipping or Russian Refining attacks this morning, so Cocoa prices seem to be taking over the commodity headlines while energy markets wait on their next big move.

RBOB gasoline futures set a new 6-month high Monday at $2.7711, which leaves the door open on the weekly charts for the spring rally to continue. A run at the $3 mark is certainly possible in the next few weeks before the typical seasonal price peak is set just before the start of driving season.

A container ship lost power and crashed into the Francis Scott Key bridge in Baltimore this morning, causing a devastating collapse. While cargo shipping into the area will no doubt be impacted by this event, fuel supplies are unlikely to see any notable change since the 9 fuel terminals in Baltimore are primarily supplied by Colonial pipeline. Barges from Philadelphia refineries do supplement Baltimore supplies at times, and those vessel flows will be impacted at least until rescue operations are completed and the bridge sections removed from the waterway. That said, since shipping up from the Gulf Coast via Colonial is generally cheaper than shipping an NY Harbor-priced barrel south, the amount of supply disrupted by this event will be minimal.

While we’re still waiting on the official forecasts for the Atlantic Hurricane season, early reports continue to suggest that we could be in for a very busy year due to warm water temperatures and a forming La Nina pattern.

Dallas meanwhile is preparing for a different sort of disruption, with city officials encouraging companies to let employees work from home during the solar eclipse on April 8th as metroplex traffic is expected to surge. While some isolated fuel outages are certainly possible if people start panic buying gasoline they don’t need, there’s no reason to expect any widespread impact from the demand spike.

Today’s interesting read: Why AI requires a staggering amount of electricity and may create supply competition for EVs that will end up benefitting fossil fuels.

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