What A Difference A Year Makes

Market TalkTuesday, Dec 24 2019
Week 44 - US DOE Inventory Recap

Energy futures are ticking modestly higher to start the quiet & abbreviated Christmas Eve trading session. Physical trading in refined products is non-existent so far and is expected to remain that way with several pipeline operators taking both Tuesday and Wednesday off.

What a difference a year makes: Christmas Eve 2018 saw a crescendo of selling that ultimately marked the bottom of the energy and equity markets after a brutal 4th quarter selloff. This year U.S. equities are sitting at all-time highs and WTI is holding steady above $60. In addition, volatility readings reached multi-year highs on Christmas eve in 2018, while this year both asset classes are at the bottom end of their range for volatility.

Speaking of different: RBOB gasoline continues its counter-seasonal strength today, trying to drag the rest of the complex higher even as we enter the weakest fundamental period of the year when demand crumbles for a few weeks, while supplies surge due to increased refinery production and butane blending. With both January and February RBOB holding above $1.70 this week, there is room on the chart to see another 10 cents of upside in gasoline before year end, despite the fundamentals suggesting we should see a pullback in prices soon.

The API’s inventory report will be released at its normal time this afternoon, but trading will already be shut down for the day due to the early holiday closing. That report might drive the early action when trading resumes after Christmas. The DOE’s weekly report is delayed until Friday.

Today’s interesting read: The Permian’s nat gas problem as oil drilling slows.

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

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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.

Pivotal Week For Price Action