The Wild Ride Continues

Market TalkFriday, Dec 7 2018
DOE Week 48 - 2018 Report

The wild ride continues this morning after cooler heads prevailed in Thursday’s session, helping energy and equity markets pull back from the brink of another major collapse. At multiple points during the day we saw refined products down more than 7 cents, only to recover each time and are starting the day with a wave of buying that had most contracts up around 2% as they awaited the OPEC announcement. US Equities saw a similar pattern, albeit for apparently different reasons, as the DJIA recovered most of its early 700 point drop by day’s end.

Conflicting headlines from the OPEC & Friends meetings continue to roil the energy markets, while equities seem to be breathing a sigh of relief that the arrest of a Chinese executive for violating US sanctions (on Iran) doesn’t appear to be stopping the talks of a trade truce.

Here’s an example of how unreliable the news wires are on the OPEC story:





Following that last headline of a 1.2 million barrel/day production cut energy prices have popped another 2-3 percent with most contracts now up 4-5% on the day.

The November jobs report showed an increase of 155,000 in non-farm payrolls, while the headline unemployment rate held steady at 3.7%, while the U-6 (aka the “real” unemployment rate) ticked up to 7.6%. Stocks moved higher in the wake of this report as it seems soft enough to keep the FED re-thinking their strategy for rate increases in 2019.

Notes from the DOE Weekly Status Report:

The headline draw of more than 7 million barrels of crude oil inventory (the first weekly decline in 11 weeks) sure seems bullish at face value, but when you dig deeper and notice that the weekly drop in imports accounted for 6.6 million barrels and the increase in exports accounted for another 5.3 million barrels. Suddenly the drop looks transitory, and even bearish, since we would have had a 5 million barrel build if the import/export flow had held steady to a week ago.

Remember the campaign slogan “drill baby drill”? Turns out that worked out better than its supporters did during the election 10 years ago as the US just became a net exporter of petroleum products last week for the first time in at least 45 years. Total oil & product imports were 8.8 million barrels per day last week, while total exports reached a new record north of 9 million barrels per day, with crude oil exports setting an all-time high north of 3 million barrels/day.

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Market TalkFriday, Sep 29 2023

The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures

The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.

The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.

We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.

The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.

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

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Market TalkThursday, Sep 28 2023

Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day

The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.

There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.

As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.

Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.

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

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