Traders Consider Refined Products' Technical Landscape
ULSD futures broke their December lows Monday morning and promptly dropped another 10 cents in a classic technical follow through after support fails to hold. Since then, however prices have bounced by 18 cents in a sign that the computer programs that make up most daily trading are still capable of buying, and that the bulls aren’t completely capitulating after a 92 cent drop in 10 trading days. If prices can remain above the $2.76 range than that brief foray to $2.66 will look like a bear trap on the charts, and we could be set for another run above $3 as the market works off an oversold condition. That said, if $2.76 fails again, then this may be nothing more than a brief corrective bounce on the way to $2.50.
RBOB gasoline futures dropped 44 cents during this sell-off bottoming out at $2.02 on Friday and have taken the lead in the recovery rally taking back 1/3 of those losses already. If the bounce in gasoline prices continues, there’s a potential for a reverse head and shoulders weekly chart pattern that would mark the end of the bear market in place since prices topped out at $4.32 in June and would set the stage for a classic spring rally that would push futures north of $3 again.
RINs have also joined in the selling over the past several sessions, falling to a 6-month low, albeit in a much less dramatic fashion than the notoriously volatile swings we’ve become accustomed to over the past decade.
Another fire at a Russian oil refinery is raising questions about whether sabotage at strategic facilities within the country is expanding, if the removal of Western experts from the Russian energy industry is taking a toll, or perhaps they’re just like any other refinery in the world, susceptible to fires as they put millions of gallons of flammable liquids under high heat and pressure.
Speaking of which, a week after an Iranian refinery mysteriously caught fire, the country offered to lend its “expertise” to Venezuela to help it repair and rebuild its refinery network that is operating at less than 10% of capacity due to years of neglect and mismanagement.
The death toll in Turkey and Syria has passed 5,000 after a devastating string of earthquakes. The major oil terminal on the Mediterranean remains shut but is expected to reopen today and should not have any lasting impact on energy markets.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllThe 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.
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.