Traders Managed To Turn A Blind Eye To A Bearish DOE Report Yesterday

Market TalkThursday, Sep 14 2023
Pivotal Week For Price Action

WTI broke through $90/barrel for the first time since November overnight and ULSD reached a new 8-month high as the march higher for energy prices continues, even as near-term supply concerns seem to be easing. 

Traders managed to turn a blind eye to a bearish DOE report yesterday that showed healthy inventory builds across the board, soft demand and oil output that’s approaching record highs despite the big reduction in drilling rigs this year. Refiners continue to take advantage of the healthy margins, with total US output hitting its highest levels of the year, despite numerous disruptions that are keeping several plants from reaching their capacity. 

(See DOE charts below)

Good news on the storm front: Hurricane Lee’s path has shifted east in the past 24 hours, and it’s expected to drop to “only” tropical storm status earlier than previous forecasts, which should lessen the impacts on the New England coast and makes a direct hit on Canada’s largest refinery less likely, while Nova Scotia is now the odds-on favorite to take the landfall of this slow-moving storm. Shipping in the region will still be impacted as the Coast Guard issues orders to secure vessels and facilities, and it’s possible we could see more delays in boat traffic next week as another system being watched by the NHC is given 90% odds of being named and is following a similar path to Lee, but staying further off shore.

4 Libyan ports have reopened to oil exports after the devastating floods that killed thousands temporarily took nearly 1 million barrels/day of supply off the global market.  Here again, traders don’t seem to care as this news did little to slow the rally despite those shutdowns being partially blamed for the run-up in prices earlier in the week.

Ethanol Prices continue to rally this week, reaching a 2-month high following a fire Monday at an ADM plant in Decatur IL which is the largest in the country.  It’s still unclear what caused the fire (besides large amounts of 198 proof alcohol being processed) or how long the repairs to the facility may take.

The EIA this morning published a note highlighting the change in energy consumption for transportation vs pre-pandemic levels this morning, which is interesting, but the data comparison is almost 2 years old, and not reflecting current trends so hopefully they didn’t pay the consultants too much of your tax dollars for the information.

Today’s interesting read from the FT: The new front in the energy wars? Government subsidies on EVs. 

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

Market Talk Update 09.14.2023

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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