U.S. Oil Fund Receives Notice From SEC 

Market TalkThursday, Aug 20 2020
Market Talk Updates - Social Header

The struggle for direction continues in energy markets as early losses Wednesday were wiped out in the afternoon, only to see another wave of selling to start Thursday’s session. Doubts about demand seem to be hitting both energy and equity markets this morning after U.S. jobless claims jumped back above one million last week.

While inventory declines for crude oil and gasoline stocks in Wednesday’s DOE report were seen as bullish, particularly compared to the API’s figures, which helped RBOB futures turn morning losses into afternoon gains, demand estimates dropped to multi-month lows, and seems to have helped keep the bulls at bay. Crude oil inventories declined for a fourth straight week in the U.S., even though exports dropped one million barrels/day. Assuming exports bounce back as they typically do following a large weekly move, we should see another draw-down in inventories next week.

Refinery runs were reduced in four out of five PADDs last week, and as we move into the fall turnaround season, we are likely to see additional reductions, some of which could be permanent if margins don’t improve soon.

Colonial pipeline finished repairs and restarted its main gasoline line Wednesday night, which should soon alleviate any lingering supply tightness in the mid-Atlantic region. 

Nothing too exciting from the OPEC compliance meeting. Output cuts were left unchanged, and the group pushed for the four countries that have been overproducing to reduce rates to make up for their excess over the next two months.

The U.S. oil fund received notice from the SEC yesterday that it could face enforcement for its actions in April when oil prices went off the rails. As this WSJ article points out, this situation highlights the risks in commodity ETFs that retail investors seem to struggle to comprehend.

The second of three potential storm systems being watched in the Atlantic basin is now known as Tropical Depression 13, and looks like it will be at least a tropical storm heading for Florida early next week. My non-scientific opinion: Don’t be surprised to see the system strengthen more than is currently projected once it reaches warmer waters, as has been the case quite often the past few years. Also, there is a decent chance this could move past Florida and be a disruptive system for the refineries in and around Louisiana.

The first disturbance being tracked by the NHC will still likely be a storm (which is why we don’t yet know what the names will be) but may be moving too far west to end up in the Gulf of Mexico. Then again, they thought Hurricane Harvey would dissipate over the Yucatan and we know what happened there, so it’s too soon to write this one off completely. The third disturbance will need a few more days to decide what it’s going to be, but we very well might have three named storms active in the near future.

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

TACenergy MarketTalk 082020

News & Views

View All
Pivotal Week For Price Action
Market TalkThursday, Mar 28 2024

Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

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, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

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