Whiplash Is The Theme This Week

Market TalkWednesday, Aug 11 2021
Pivotal Week For Price Action

Whiplash is the theme this week, as refined products have their 3rd straight nickel swing in the early going, wiping out most of Tuesday’s gains…which wiped out most of Monday’s losses. The pullback keeps the August trend-lines pointing down, with lower highs set in each subsequent bounce suggesting more selling to come unless the bulls manage to break back above the July highs.

A major difference in today’s selling is that rising COVID cases aren’t taking the blame for the selling, instead a report that the White House is pressuring OPEC & Friends to produce more oil and help tame prices is getting credit for the selloff.  

At face value that doesn’t seem to help explain why gasoline is leading the slide, but the report also suggests the white house is going to push the federal trade commission to take a look at rising gasoline prices. That investigation doesn’t need much effort to see the inconvenient truth that the RFS, LCFS and Cap & Trade programs each add more than 20 cents/gallon to fuel prices, and by design will get costlier each year. Then again, blaming climate change programs for rising prices won’t win many points in Washington, and it will be easier to blame refiners, which could complicate some of the acquisitions currently in process.

After several big moves in the past 2 weeks, West Coast basis values cooled off Tuesday, but could see more buying pressure today if the latest in a string of refinery hiccups disrupts one of the last refineries standing in the SF Bay area. 

You think prices are volatile now? Read this WSJ article on the tough decisions retail stations have to make in regards to EV charging stations, one of which is having to guess at what their electricity costs will be. Those retail stations did score a major victory this week when the new infrastructure bill prevented interstate rest-stops from installing EV chargers, which would have put utilities in a position to directly compete with those stations, using federal property in many cases.

The EIA’s Short Term Energy Outlook seemed to offer a bullish boost to prices Tuesday, as the agency’s contracted thinkers at IHS increased their gasoline demand estimates, and lowered their OPEC oil output forecasts. The report highlighted how both calendar and crack spreads for gasoline have reached multi-year highs as inventories have rapidly drawn down in recent months. Once again, the report fails to mention the influence of RIN values on those gasoline prices, which knock about $8.5/barrel (~20 cents/gallon) off of those crack spreads.

The API’s weekly report looks like it was largely shrugged off, with only minimal changes in inventory reported. Crude stocks were said to be down 816k barrels, gasoline was down 1.1 million and distillates built 673k. The EIA’s version of the stats are scheduled to be out at their normal time this morning.

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

Market Update (01A) 8.11

News & Views

View All
Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

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

Pivotal Week For Price Action
Market TalkTuesday, Mar 26 2024

Refined Products Seeing Small Losses Of Around A Penny While Crude Oil Contracts Hover Just Above Break Even

Energy futures are taking a breather to start Tuesday’s trading, with refined products seeing small losses of around a penny while crude oil contracts hover just above break even.

No new news on either the Red Sea shipping or Russian Refining attacks this morning, so Cocoa prices seem to be taking over the commodity headlines while energy markets wait on their next big move.

RBOB gasoline futures set a new 6-month high Monday at $2.7711, which leaves the door open on the weekly charts for the spring rally to continue. A run at the $3 mark is certainly possible in the next few weeks before the typical seasonal price peak is set just before the start of driving season.

A container ship lost power and crashed into the Francis Scott Key bridge in Baltimore this morning, causing a devastating collapse. While cargo shipping into the area will no doubt be impacted by this event, fuel supplies are unlikely to see any notable change since the 9 fuel terminals in Baltimore are primarily supplied by Colonial pipeline. Barges from Philadelphia refineries do supplement Baltimore supplies at times, and those vessel flows will be impacted at least until rescue operations are completed and the bridge sections removed from the waterway. That said, since shipping up from the Gulf Coast via Colonial is generally cheaper than shipping an NY Harbor-priced barrel south, the amount of supply disrupted by this event will be minimal.

While we’re still waiting on the official forecasts for the Atlantic Hurricane season, early reports continue to suggest that we could be in for a very busy year due to warm water temperatures and a forming La Nina pattern.

Dallas meanwhile is preparing for a different sort of disruption, with city officials encouraging companies to let employees work from home during the solar eclipse on April 8th as metroplex traffic is expected to surge. While some isolated fuel outages are certainly possible if people start panic buying gasoline they don’t need, there’s no reason to expect any widespread impact from the demand spike.

Today’s interesting read: Why AI requires a staggering amount of electricity and may create supply competition for EVs that will end up benefitting fossil fuels.

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