There’s A Tug Of War Between Gasoline And Diesel Prices This Week As RBOB Futures Come Under Heavy Selling Pressure

Market TalkTuesday, Aug 23 2022
Pivotal Week For Price Action

There’s a tug of war between gasoline and diesel prices this week as RBOB futures come under heavy selling pressure, while ULSD looks poised to make another run at $4.

The dichotomous action between gasoline and diesel prices pushed the premium for ULSD more than 90 cents/gallon above RBOB futures, something we’ve never seen outside of the chaotic early days of the war in Ukraine. When the October contracts take the prompt position next week, the spread will be north of $1/gallon as RBOB transitions to its winter spec, which may also explain part of the weakness in the gasoline contract recently as traders realize that the driving season is rapidly coming to an end.

US equity markets are another bearish influence on gasoline prices lately as the correlation between the two has been the strongest in the past two years, just in time for the summer stock rally to run out of steam. Yesterday was the worst day in 2 months for the S&P 500, and it appears that the sellers trickled into the gasoline arena. Distillates meanwhile seem to be ignoring the move in stocks and more in line with the fact that the world is still facing a severe supply shortage which may get worse this winter

Speaking of which, the Saudi Energy Minister (an outspoken critic of speculators in the oil market) expressed his displeasure with oil markets trading lower in the past 2 months despite the global energy supply crunch, and suggested it may cause OPEC to cut production. That statement helped oil prices bounce after an early selloff Monday which was blamed on news that negotiators were closing in on a deal with Iran, even though the US state department says significant gaps remain

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Market Talk Update 08.23.22

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Pivotal Week For Price Action
Market TalkThursday, Feb 29 2024

It's Another Mixed Start For Energy Futures This Morning After Refined Products Saw Some Heavy Selling Wednesday

It's another mixed start for energy futures this morning after refined products saw some heavy selling Wednesday. Both gasoline and diesel prices dropped 7.5-8.5 cents yesterday despite a rather mundane inventory report. The larger-than-expected build in crude oil inventories (+4.2 million barrels) was the only headline value of note, netting WTI futures a paltry 6-cent per barrel gain on the day.

The energy markets seem to be holding their breath for this morning’s release of the Personal Consumption Expenditures (PCE) data from the Bureau of Economic Analysis (BEA). The price index is the Fed’s preferred inflation monitor and has the potential to impact how the central bank moves forward with interest rates.

Nationwide refinery runs are still below their 5-year average with utilization across all PADDs well below 90%. While PADD 3 production crossed its 5-year average, it’s important to note that measure includes the “Snovid” shutdown of 2021 and throughput is still below the previous two years with utilization at 81%.

We will have to wait until next week to see if the FCC and SRU shutdowns at Flint Hills’ Corpus Christi refinery will have a material impact on the regions refining totals. Detail on the filing can be found on the Texas Commission on Environmental Quality website.

Update: the PCE data shows a decrease in US inflation to 2.4%, increasing the likelihood of a rate cut later this year. Energy futures continue drifting, unfazed.

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Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

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