Total US Crude Oil Stocks Drew Down Slightly Due To Lower Imports

Market TalkThursday, Jul 27 2023
Pivotal Week For Price Action

The smaller-than-expected product draws, reported by the Department of Energy yesterday, seems to be what the headlines are pointing towards to explain yesterday’s rally in energy futures. However, the bump in refinery runs, particularly in the PADD 1 region (the delivery point of the NYMEX refined product contracts), suggest yesterday’s rally was primarily driven by the speculative traders, riding the momentum of a rally that started earlier this month. It wouldn’t be a surprise to see a net addition of long position put on by money managers on Monday’s Commitment of Traders report.

Total US crude oil stocks drew down slightly due to lower imports and increased exports and refinery runs. Diesel stocks stayed pat with rising imports offset by rising demand. Gasoline demand continues to recover from last month’s drop off but is still well below the 5-year average.

While there is no smoking gun on why US ethanol stocks have broken through the top end of its 5-year seasonal range, other than “we made more of it”, it will be interesting to see if the new rice export rules India imposed this week will have a more resounding impact on the global ethanol market. In semi-related news, Indonesia’s state-run energy company Pertamina has begun supplying gasoline with a 5% mixture of ethanol, made from sugar molasses.

How many ways can we express that it’s hot outside, and that isn’t good? The EIA published a report this morning illustrating how much more power is required to cool commercial buildings in hot vs cold weather. While 98% of the energy consumed in keeping our offices chilly is supplied by electricity with only a fraction of a fraction coming from petroleum products, further stressing some states’ energy grids may cause some plants to subsidize output deficits by burning natural gas or ULSD.

The three storm systems that addled the NOAA’s 7-day forecast just two days ago have all but dissipated, save for one area of intrigue that has a 40% chance of development in the next week. As of now, the potential storm looks like it will curve northward, potentially staying out to sea as we’ve seen prior storms do earlier this season. So far there has been no activity threatening the nation’s refining center in the Gulf Coast, but we are still about a month away from peak hurricane season.

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

Market Talk Update 07.27.2023

News & Views

View All
Pivotal Week For Price Action
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.

Pivotal Week For Price Action
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.

Pivotal Week For Price Action