The US Added Almost 9 Million Barrels Of Crude Oil Inventory Last Week

Market TalkFriday, Sep 9 2022
Pivotal Week For Price Action

The US added almost 9 million barrels of crude oil inventory last week as we continue to pull from our Strategic Petroleum Reserve in an effort to lower prices. Slowing oil exports and a bump in imports is helping the nation replenish its energy stockpiles, however the total oil on-hand still remains below the 5-year seasonal average as the US, along with the rest of the world, continues to cope with the vast reduction of energy exports from Russia. We also added diesel and gasoline stores last week, according to the weekly DOE report released yesterday. Gasoline inventories added 333 thousand barrels last week while distillates increased by a meager 95,000 barrels.

Queen Elizabeth II ended her 70 year reign of the United Kingdom yesterday, passing away at the age of 96. While her death and shakeup of the monarchy isn’t expected to make any drastic impacts to the energy landscape, she died shortly after appointing a new prime minister whose first major action was passing a cap on electricity bills for the United Kingdom. This legislative action highlights the dire situation Europe is in concerning their projected energy costs for this winter.

While Hurricane Earl continues to churn out to sea, “only” threatening the US East Coast with dangerous rip currents, the rest of the Atlantic basin has calmed down significantly, for now. The handful of systems coming off the African coast are given a low probability (20%-30%) of organizing into a storm over the next five days. Tropical Storm Kay was downgraded from Hurricane status yesterday after making landfall in Baja Mexico. While the scope of her potential impact on the US mainland has significantly shrunk, the storm could still cause flash flooding in the Southern California area but will likely stay east of the major population centers of San Diego and Los Angeles.

Oil prices are set up for a drop on the week, however slightly, but price action is continuing to follow the bearish trend it started since mid-June. The gasoline chart is testing the support of its 100-week moving average in a bid to keep dropping in the short term. If the support doesn’t hold, not much stands in the way to keep the prompt month contract from challenging the $2 mark. Diesel, on the other hand, looks to be content in its sideways pattern, refusing to come back to “reality” since its overseas demand remains elevated. The proportion of global diesel demand vs gasoline is much higher than it is in the States and its use a backup fuel for heating and electricity generation has buoyed prices through this three-month selloff.

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Market Talk Update 09.09.2022

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Market TalkFriday, Jul 19 2024

Summertime-Friday-Apathy Trade Influencing Energy Markets

Energy markets are treading water to start the day as the Summertime-Friday-Apathy trade seems to be influencing markets around the world in the early going. RBOB futures are trying for a 3rd straight day of gains to wipe out the losses we saw to start the week, while ULSD futures continue to look like the weak link, trading lower for a 2nd day and down nearly 3 cents for the week.

Bad to worse: Exxon’s Joliet refinery remains offline with reports that repairs may take through the end of the month. On top of that long delay in restoring power to the facility, ENT reported this morning that the facility has leaked hydrogen fluoride acid gas, which is a dangerous and controversial chemical used in alkylation units. Chicago basis values continue to rally because of the extended downtime, with RBOB differentials approaching a 50-cent premium to futures, which sets wholesale prices just below the $3 mark, while ULSD has gone from the weakest in the country a month ago to the strongest today. In a sign of how soft the diesel market is over most of the US, however, the premium commanded in a distressed market is still only 2 cents above prompt futures.

The 135mb Calcasieu Refinery near Lake Charles LA has been taken offline this morning after a nearby power substation went out, and early reports suggest repairs will take about a week. There is no word yet if that power substation issue has any impacts on the nearby Citgo Lake Charles or P66 Westlake refineries.

Two tanker ships collided and caught fire off the coast of Singapore this morning. One ship was a VLCC which is the largest tanker in the world capable of carrying around 2 million barrels. The other was a smaller ship carrying “only” 300,000 barrels (roughly 12 million gallons) of naphtha. The area is known for vessels in the “dark fleet” swapping products offshore to avoid sanctions, so a collision isn’t too surprising as the vessels regularly come alongside one another, and this shouldn’t disrupt other ships from transiting the area.

That’s (not) a surprise: European auditors have determined the bloc’s green hydrogen goals are unattainable despite billions of dollars of investment, and are based on “political will” rather than analysis. Also (not) surprising, the ambitious plans to build a “next-gen” hydrogen-powered refinery near Tulsa have been delayed.

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Market TalkThursday, Jul 18 2024

Refined Products Stanch Bleeding Despite Inventory Builds And Demand Slump

Refined products are trading slightly lower to start Thursday after they stopped the bleeding in Wednesday’s session, bouncing more than 2 cents on the day for both RBOB and ULSD, despite healthy inventory builds reported by the DOE along with a large slump in gasoline demand.

Refinery runs are still above average across the board but were pulled in PADD 3 due to the short-term impacts of Beryl. The Gulf Coast region is still outpacing the previous two years and sitting at the top end of its 5-year range as refiners in the region play an interesting game of chicken with margins, betting that someone else’s facility will end up being forced to cut rates before theirs.

Speaking of which, Exxon Joliet was reportedly still offline for a 3rd straight day following weekend thunderstorms that disrupted power to the area. Chicago RBOB basis jumped by another dime during Wednesday’s session as a result of that downtime. Still, that move is fairly pedestrian (so far) in comparison to some of the wild swings we’ve come to expect from the Windy City. IIR via Reuters reports that the facility will be offline for a week.

LA CARBOB differentials are moving in the opposite direction meanwhile as some unlucky seller(s) appear to be stuck long and wrong as gasoline stocks in PADD 5 reach their highest level since February, and held above the 5-year seasonal range for a 4th consecutive week. The 30-cent discount to August RBOB marks the biggest discount to futures since 2022.

The EIA Wednesday also highlighted its forecast for rapid growth in “Other” biofuels production like SAF and Renewable Naptha and Propane, as those producers capable of making SAF instead of RD can add an additional $.75/gallon of federal credits when the Clean Fuels Producer’s Credit takes hold next year. The agency doesn’t break out the products between the various “Other” renewable fuels, but the total projected output of 50 mb/day would amount to roughly 2% of total Jet Fuel production if it was all turned to SAF, which of course it won’t as the other products come along for the ride similar to traditional refining processes.

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

Pivotal Week For Price Action