Winter Storm Cripples Demand Along East Coast
Refined products are in a technical breakout to start Tuesday’s session, even as a major winter storm cripples demand along the east coast. The rally appears to be technically driven after prices bounced sharply off of trend-line support Monday, creating an outside-up bar, and following through with a strong rally overnight that is pushing prices towards one year highs.
The worst winter storm to hit parts of the east coast in five years doesn’t seem to matter to traders this morning even as it’s sure to sap transportation demand in the region over the next few days, without getting cold enough to spark a surge in heating demand. That fundamental weakness will be a good test for this rally in the back half of this week, and next when we see the inventory reports that will reflect the slowdown. The next natural resistance level looks to be the $1.68 range for RBOB and the $1.72 range for ULSD, both marking last February’s high water marks.
Exxon reported a $20 Billion loss in the fourth quarter, as the company wrote off $19 billion in impairments in its upstream operations, “…including certain dry gas resources in the United States, western Canada, and Argentina.” The refining & downstream segment “only” lost $1.2 billion for the quarter.
Marathon reported positive earnings for Q4 with solid gains from its midstream assets, soon-to-be discontinued Speedway operations, and a billion dollar write up in inventory values helping to offset a $1.6 billion loss in their refining segment. Its Dickinson ND Renewable Diesel facility is expected to be online in the next couple of months, with a 12mb/day capacity that will head to California to earn the additional $1.50/gallon or so in LCFS credits, on top of the $1 federal Blenders tax credit. Those credits are of course on top of the RIN value.
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
Energy Futures Are Drifting Quietly Higher This Morning
Refined Products Holding Close To Break Even While Oil Prices Are Losing Just Under 1%
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
The energy complex is trading modestly lower so far this morning with WTI crude oil futures leading the way, exchanging hands $1.50 per barrel lower (-1.9%) than Tuesday’s settlement price. Gasoline and diesel futures are following suit, dropping .0390 and .0280 per gallon, respectively.
A surprise crude oil build (one that doesn’t include any changes to the SPR) as reported by the American Petroleum Institute late Tuesday is taking credit for the bearish trading seen this morning. The Institute estimated an increase in crude inventories of ~5 million barrels and drop in both refined product stocks of 1.5-2.2 million barrels for the week ending April 26. The Department of Energy’s official report is due out at it’s regular time (9:30 CDT) this morning.
The Senate Budget Committee is scheduled to hold a hearing at 9:00 AM EST this morning regarding a years-long probe into climate change messaging from big oil companies. Following a 3-year investigation, Senate and House Democrats released their final report yesterday alleging major oil companies have internally recognized the impacts of fossil fuels on the climate since as far back as the 1960s, while privately lobbying against climate legislation and publicly presenting a narrative that undermines a connection between the two. Whether this will have a tangible effect on policy or is just the latest announcement in an election-yeardeluge is yet to be seen.
Speaking of deluge, another drone attack was launched against Russian infrastructure earlier this morning, causing an explosion and subsequent fire at Rosneft’s Ryazan refinery. While likely a response to the five killed from Russian missile strikes in Odesa and Kharkiv, Kyiv has yet to officially claim responsibility for the attack that successfully struck state infrastructure just 130 miles from Moscow.
The crude oil bears are on a tear this past week, blowing past WTI’s 5 and 10 day moving averages on Monday and opening below it’s 50-day MA this morning. The $80 level is likely a key resistance level, below which the path is open for the American oil benchmark to drop to the $75 level in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Energy Futures Are Drifting Quietly Higher This Morning
Energy futures are drifting quietly higher this morning as a new round of hostage negotiations between Israel and Hamas seem to show relative promise. It seems the market is focusing on the prospect of cooler heads prevailing, rather than the pervasive rocket/drone exchanges, the latest of which took place over Israel’s northern border.
A warmer-than-expected winter depressed diesel demand and, likewise, distillate refinery margins, which has dropped to its lowest level since the beginning of 2022. The ULSD forward curve has shifted into contango (carry) over the past month as traders seek to store their diesel inventories and hope for a pickup in demand, domestic or otherwise.
The DOE announced it had continued rebuilding it’s Strategic Petroleum Reserve this month, noting the addition of 2.3 million barrels of crude so far in April. Depending on what the private sector reported for last week, Wednesday’s DOE report may put current national crude oil inventories (include those of the SPR) above the year’s previous levels, something we haven’t seen since April of 2022, two months after Ukraine war began.
The latest in the Dangote Refinery Saga: Credit stall-out, rising oil prices, and currency exchange.
Click here to download a PDF of today's TACenergy Market Talk.