We’re Seeing Plenty Of Choppy, Back And Forth Trading In Energy Markets This Week

Market TalkWednesday, Nov 16 2022
Pivotal Week For Price Action

We’re seeing plenty of choppy, back and forth trading in energy markets this week as the tug of war between tight supplies and a negative demand outlook continues, while numerous geopolitical headlines are keeping markets on edge. 

2 people in Poland were killed by a missile Tuesday, which appeared to help push energy prices higher until reports overnight that it may have been errant fire from Ukrainian air defenses, not a Russian attack that could have escalated the conflict. Adding to the chaos, a different missile attack knocked a pumping station offline and caused an oil pipeline traveling through Ukraine to cut flows to neighboring countries. 

Meanwhile Iran has apparently started up its saber rattling campaign again with reports that an fuel tanker off the Oman coast was hit by an armed drone overnight, a day after the US Navy intercepted a large shipment of explosives in the area.  

The API reported a large draw of nearly 6 million barrels of crude oil last week, despite another 4 million barrels being released from the SPR. Gasoline inventories were estimated to build by 1.7 million barrels while distillates increased by 842,000 barrels. The DOE’s weekly report is due out at its normal time this morning.  

Ethanol prices have been dropping this week, but could reverse course after a 3rd union has rejected the agreement with railroad operators, which may force congress to step in to avoid a nationwide rail strike.  The EPA was supposed to release its proposed rules for the RFS in 2023 today, but has received a 2 week extension to November 30. RINs are holding near 18 month highs as the market seems to be betting the agency will take a hard line on refiners. 

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

Market Talk Update 11.16.2022

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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
Pivotal Week For Price Action
Market TalkWednesday, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

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