ULSD Prices Hit 14 Month Lows, Rally Attempts Underway After Jobs Report

Market TalkFriday, Mar 10 2023
Pivotal Week For Price Action

Another wipeout Thursday pushed energy and equity markets sharply lower and set the stage for diesel prices to hit their lowest level since January 2022 overnight, only to see an impressive bounce in the past hour. Prices are attempting to rally in the aftermath of the February jobs report, even though a crisis at two West Coast banks is sending ripples of panic across the financial industry and adding to the already negative sentiment that’s gripped markets for much of the week. 

Energy futures didn’t react much initially to the February payroll report that showed another healthy month of growth with 311k jobs added, while the December and January estimates were revised lower. Both the headline and U-6 unemployment rates ticked up by .2% despite the job growth as the labor participation rate increased, AKA more people started looking for jobs that weren’t counted in the labor force previously, which could be taken as a bullish signal for both stocks and energy futures and may explain why prices started rallying about 10 minutes after the report was released.

The adage that there’s no such thing as a triple bottom held true for ULSD as prices touched $2.66 for a 4th time in a month Thursday before breaking down to new 13-month lows at $2.6294 overnight. The fact that prices did manage to rally a dime after setting that new low may encourage some bottom fishing and we’re certainly due for a corrective bounce after the 25 cent drop this week. While the rally has picked up steam heading into the 8 o’clock hour, there’s still more work to do to break the downward trend that’s taken hold this week with a rally above 2.80 needed for ULSD to look less vulnerable. If prices fail to settle back above the $2.66 range, the charts are giving strong favor to a quick move to $2.50 or below before the end of the month.

French strikes continue to disrupt refinery output for a 4th day. This news has been largely shrugged off in the so much other negative sentiment this week but could still be a factor in a price rally if it continues next week.

Near term demand doesn’t look like it’s quite ready to ramp up as spring is taking its sweet time arriving across much of the country, while another round of winter storms prepare to batter both the East and West coasts.

Unintended consequences: Why big oil may end up receiving many of the tax credits offered in the climate law branded as an inflation reduction act.

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Market Talk Update 03.10.2023

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Pivotal Week For Price Action
Market TalkMonday, Oct 2 2023

Gasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading

Gasoline futures are leading the energy complex higher this morning with 1.5% gains so far in pre-market trading. Heating oil futures are following close behind, exchanging hands 4.5 cents higher than Friday’s settlement (↑1.3%) while American and European crude oil futures trade modestly higher in sympathy.

The world’s largest oil cartel is scheduled to meet this Wednesday but is unlikely they will alter their supply cuts regimen. The months-long rally in oil prices, however, has some thinking Saudi Arabia might being to ease their incremental, voluntary supply cuts.

Tropical storm Rina has dissolved over the weekend, leaving the relatively tenured Philippe the sole point of focus in the Atlantic storm basin. While he is expected to strengthen into a hurricane by the end of this week, most projections keep Philippe out to sea, with a non-zero percent chance he makes landfall in Nova Scotia or Maine.

Unsurprisingly the CFTC reported a 6.8% increase in money manager net positions in WTI futures last week as speculative bettors piled on their bullish bets. While $100 oil is being shoutedfromeveryrooftop, we’ve yet to see that conviction on the charts: open interest on WTI futures is far below that of the last ~7 years.

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

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.