Traders Consider Refined Products' Technical Landscape

Market TalkTuesday, Feb 7 2023
Pivotal Week For Price Action

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.

Market Talk Update 02.07.2023

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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.

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
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.