While Crude Oil Prices Also Saw Morning Losses Turn Into Afternoon Gains Yesterday, Diesel Prices Were Left Behind

Market TalkTuesday, Mar 7 2023
Pivotal Week For Price Action

Gasoline futures staged another impressive turnaround Monday, rallying 9 cents from their morning lows to settle at a 4-month high. Prices continued higher overnight, briefly trading north of $2.80 before seeing another modest pullback this morning. The technical stage is now set for gasoline futures to make a run at the $3 mark, although as the early action this morning reminds us, it will not take a straight path to get there.

Gulf Coast gasoline prices outpaced the rest of the country by 6-8 cents/gallon Monday as colonial pipeline took the next step in the spring gasoline transition, making 11.5-pound RVP the tradeable contract and beginning to close the gap with prices on the West Coast as California grades have already converted to 6lb RVP. 

While crude oil prices also saw morning losses turn into afternoon gains yesterday, diesel prices were left behind, with a huge sell-off in natural gas prices getting much of the blame for the underperformance in distillates.

Another round of protests in France has reportedly halted fuel shipments from all of the country’s refineries as workers attempt to disrupt the economy to stop changes to the state pension system. Last fall, French refinery protests contributed to the acute shortage of diesel across much of the Atlantic basin, which culminated in NYH ULSD trading up to $5/gallon in November. So far, multiple rounds of strikes in 2023 have had little impact on fuel prices, as the abnormally warm winter has suppliers dealing with excess after months of fearing shortages. While the pressure has been temporarily lifted on supplies, don’t be surprised if these latest strikes cause a price rally if they last more than a day or two.

Speaking of fearing shortages, the snapshots below from the EIA’s winter Fuels outlook last fall is a good reminder of how much of the industry was on edge about fuel supplies just a few short months ago. We’ll get the latest outlook from the agency later this morning in their monthly STEO report. 

Another major factor in the world seeing substantial healing in fuel supplies over the past few months has been new refining capacity coming online, mostly in Asia and the Middle East.  This morning, Kuwait reported the 2nd phase of its new 615,000 b/d refinery project has been brought online, a month or more ahead of schedule.  

The FED chairman will testify before congress today on the state of the US Economy. The CME’s Fedwatch tool shows that traders are split roughly 50/50 on whether or not we’ll see a combination of rate increases exceeding 75 basis points in the next 4 months and are eagerly awaiting today’s statements to speculate endlessly over whatever is said. Since the correlations between energy prices and equity and currency markets has been fairly soft for the past several months, this may have less influence on fuel prices than we’ve seen in years past, but those patterns can change in an instant depending on the mood and/or programming of the traders involved. 

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

Market Talk Update 03.07.2023

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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.