ULSD Futures Trying To Lead Energy Complex Higher To Start Wednesday Session

Market TalkWednesday, Jul 19 2023
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ULSD futures are trying to lead the energy complex higher to start Wednesday’s session, trading up 4 cents/gallon and reaching a fresh 3-month high at $2.6412, but are finding WTI and RBOB to be somewhat unwilling participants in the early going.

The API reported gasoline inventories in the US dropped by 2.8 million barrels last week, but the decline seems to have been largely shrugged off as RBOB futures are only up around ½ cent in the early going. The report showed a small draw of 100,000 barrels for diesel and 800,000 barrels for crude oil. The DOE weekly report is due out at its normal time, and the weekly demand estimates will be closely watched after the big drop from the holiday hangover last week.

A new report from the IEA this morning said electricity demand in Europe is set to drop to its lowest level in 20 years due to the fallout of last year’s energy crisis, but demand is expected to rebound strongly next year. A follow-up note from the FT suggests this is exactly why Western economies need to prepare for Russia to take another swing with its energy sword in the next year.

While Tropical Storm Calvin batters Hawaii and Tropical Storm Don continues to do loops in the open Atlantic, the NHC is also tracking a new potential storm system moving off the coast of Africa this week. That system is only given 20% odds of developing at this point, but as we move into August we typically see more activity in this region, including several of the biggest storms of all time.

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Market Talk Update 07-19-23

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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.

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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