The Missing Story Of A Year That Smashed Pretty Much Every Record In the Books

Market TalkFriday, Dec 30 2022
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Energy prices are limping to the finish line of the wildest year on record. If you only look at the ending prices, you would probably wonder what all the fuss is about. WTI is only up 4% on the year, while Brent and RBOB futures are up a pedestrian 7%. Of course, that misses the story of a year that smashed pretty much every record in the books.

An average trading day in 2022 saw gasoline price move more than 13 cents/gallon, while distillates swung by an average of almost 19, which is nearly 4 times their long-term average range. We had multiple times throughout the year where futures and/or cash markets moved by more than $1/gallon throughout a single session. That extreme volatility, combined with increasing margin rates from the exchanges, and higher interest rates, led to many traders being forced out of these markets or choosing to sit on the sidelines for the rest of the year (or longer) since they couldn’t handle those swings, which pushed open interest for these contracts to a 6 year low.

So, what’s ahead in 2023?  It’s hard to imagine the world will face another shock like the largest war in Europe since WW2, or a global pandemic, so there’s a strong chance we’ll have less volatility. The war in Ukraine, COVID, and interest rate policy all look like they’ll remain major themes that can influence prices. There’s a large amount of new refining capacity that has either come online in the past few months or is scheduled to in the next year which should also help calm refined product markets. The challenge for the US and Europe is that 90% of new capacity is coming from Asia and the Middle East.

Short term it looks like the US dodged another supply bullet as the damage from the Christmas Blizzard - that impacted just about every single refinery east of the Rockies - looks to be limited. Even though several plants will need another week or two to complete repairs, and at least one refinery will be offline for months, the larger complexes along the gulf coast – which accounts for roughly half of all US capacity – seem to have escaped with relatively minor damage. 

If you haven’t already been bombarded with notices, here’s a reminder the Federal Superfund tax is being reinstated in 2023 and will start showing up as a line item on your invoices. Please note the tax only applies to the petroleum portion of the fuel, so any ethanol, biodiesel, or renewable diesel should not have that fee apply. In addition, if you’re in the state of Washington, the new clean fuel programs start Sunday, which are estimated to add approximately 50 cents/gallon to refined product prices, with most suppliers embedding this in their daily prices.

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

Market talk Update 12-30-22

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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.