We’re Seeing Overnight Losses Turn Into Morning Gains For A Third Straight Session

Market TalkWednesday, Oct 26 2022
Pivotal Week For Price Action

We’re seeing overnight losses turn into morning gains for a third straight session as the US East Coast continues to grapple with tight supplies of gasoline and diesel that are giving traders plenty of reasons to buy any dip.   

What’s different about the rallies this week is it has been RBOB more than ULSD leading the charge as the East Coast shortages are suddenly worse on gasoline than they are for diesel, with numerous short term terminal outages of RBOB and ethanol reported in the region over the past 72 hours due to various supply delays.

November RBOB futures saw a 24 cent rally from low to high Tuesday, the biggest jump in prices since the chaotic trading in May. The November/December RBOB spread surged past 35 cents during that rally, proving that the rally is more short squeeze caused by a variety of disruptions in supply, rather than an expectation of strong gasoline demand. 

Premiums to ship product on Colonial pipeline for both gasoline and diesel remain in positive territory for the first time since May as refiners struggle to find ways to move product from the Gulf Coast to the East Coast.  

Who needs more pipelines anyway? While Europe continues to struggle with supply shortages and extremely high prices, natural gas producers in West Texas are now having to pay buyers to get rid of their product as pipeline maintenance reduces outlets for that fuel.  

The API reported a build of 4.5 million barrels of crude oil inventory last week, thanks to another 3 million barrel release from the SPR, while gasoline stocks declined by 2.3 million barrels and distillates ticked slightly higher by 635k barrels. The DOE/EIA’s weekly report is due out at its normal time this morning.

A couple of interesting notes from Valero’s earnings call Tuesday (Besides the $2.8 billion in quarterly profit) was that the company expects more SPR releases from the US (of which they’re a major buyer) and they don’t expect any of the refineries shuttered in the past couple of years to come back online.    

Speaking of which, an EPA report on the shuttered refinery now known as Limetree Bay (formerly known as Hovensa) suggests that the odds of that plant ever operating again are slim to none. Don’t worry though, China is starting up one of its new refineries this week, and we know how they like to play nice with the rest of the world.   

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

Market Talk Update 10.26.2022

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Pivotal Week For Price Action
Market TalkFriday, Mar 1 2024

Oil Futures Are Leading The Energy Complex In A Modest Rally To Begin March Trading

Oil futures are leading the energy complex in a modest rally to begin March trading, with WTI and Brent both up around $1.50/barrel, while refined products are adding around 2 cents in the early going.

RBOB gasoline futures rolled to a summer-grade RVP with the April contract in prompt position this morning. West Coast cash markets are already converted to summer grades, so they’re holding their premiums to futures, while the markets east of the Rockies are now trading at substantial discounts to futures as they move through their remaining winter-cycles over the next 4-6 weeks. The high trade for the April RBOB contract last month was just north of $2.63, which sets the first layer of resistance to a March madness gasoline rally just about 3 cents north of current values.

While gasoline looks somewhat bullish on the charts, and has seasonal factors working in its favor, diesel prices look weak in comparison with prices reaching a 6-week low Thursday before finally finding a bid, and the roll to April futures cut out 3 cents from prompt values. Diesel prices also don’t enjoy the seasonal benefits of gasoline, with a winter-that-wasn’t offering no help for supplemental diesel demand to replace natural gas in the US or Europe.

Speaking of winter weather, the West Coast continues to get the worst of it in 2024, with a casual 10 feet of snow with 100+ mile an hour wind gusts hitting the Sierra Nevada range. While the worst of that winter storm is happening far from the coast, the San Francisco bay area is under a gale warning starting this afternoon.

The wildfires in the Texas panhandle are now the largest in state history, impacting more than 1 million acres of land. The P66 Borger refinery is caught between the blazes, but so far has not reported any operational issues or plans to change operations at the facility. Valero’s McKee refinery is located just 50 miles from Borger, but looks to be far enough north and West to not be threatened by the fires, for now at least.

Mass Exxodus? A Reuters report noted that Exxon had notified its traders that it was cutting their salaries, in another sign that the major’s move back into trading wasn’t going so well. Exxon’s Exodus has already been a bit of a joke for the past few years, and now that the traders are being targeted, don’t be surprised if the cube photos are taken to a new level.

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

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