Winter Storm Izzy Is Sweeping Up The East Coast After Battering Large Parts Of The Country Over The Weekend

Market TalkMonday, Jan 17 2022
Traders Torn As Opposing Trend Lines Converge

WTI and RBOB prices are hovering near break-even while ULSD is holding gains of about a penny, which would mark its 11th consecutive increase if it settles in positive territory. It’s MLK Jr. day so physical fuel markets won’t be assessed, and many in the industry are taking the day off, although futures are trading. 

Winter storm Izzy is sweeping up the East Coast after battering large parts of the country over the weekend. So far, supply disruptions appear limited to a few terminal power outages, while the demand impact seems much more widespread as drivers avoid the roads. If you haven’t had enough winter fun yet, don’t worry, there’s another storm expected to follow a similar path to Izzy later this week.

Money managers continue to add large bets on higher energy prices, with all contracts besides RBOB seeing healthy increases in net length added by the large speculative category of trader last week. While WTI saw heavy short covering in the latest COT report, its net length added lagged Brent, and with a slew of new competing oil contracts emerging in the US that could continue taking market share, that trend may continue.

Baker Hughes reported a net increase of 11 oil rigs drilling in the US last week, with the Eagle Ford basin accounting for the majority of that increase, adding 6 rigs to a basin with only 44 active a week ago.  The EIA and IEA are both projecting that US Oil production will push to all-time highs by the end of this year, and this report suggests that drillers are well on their way despite the well-documented supply chain and financing challenges. 

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Market Talk Update 1.17.22

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Pivotal Week For Price Action
Market TalkWednesday, Jun 7 2023

Energy Prices Fluctuate: Chinese Imports Surge, Saudi Arabia Cuts Output and Buys Golf

Energy prices continue their back-and-forth trading, starting Wednesday’s session with modest gains, after a round of selling Tuesday wiped out the Saudi output cut bounce. 

A surge in China’s imports of crude oil and natural gas seem to be the catalyst for the early move higher, even though weak export activity from the world’s largest fuel buyer suggests the global economy is still struggling. 

New tactic?  Saudi Arabia’s plan to voluntarily cut oil production by another 1 million barrels/day failed to sustain a rally in oil prices to start the week, so they bought the PGA tour

The EIA’s monthly Short Term Energy Outlook raised its price forecast for oil, citing the Saudi cuts, and OPEC’s commitment to extend current production restrictions through 2024. The increase in prices comes despite reducing the forecast for US fuel consumption, as GDP growth projections continue to decline from previous estimates. 

The report included a special article on diesel consumption, and its changing relationship with economic activity that does a good job of explaining why diesel prices are $2/gallon cheaper today than they were a year ago.   

The API reported healthy builds in refined product inventories last week, with distillates up 4.5 million barrels while gasoline stocks were up 2.4 million barrels in the wake of Memorial Day. Crude inventories declined by 1.7 million barrels on the week. The DOE’s weekly report is due out at its normal time this morning. 

We’re still waiting on the EPA’s final ruling on the Renewable Fuel Standard for the next few years, which is due a week from today, but another Reuters article suggests that eRINs will not be included in this round of making up the rules.

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Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkTuesday, Jun 6 2023

Energy Prices Retreat, Global Demand Concerns Loom

So much for that rally. Energy prices have given back all of the gains made following Saudi Arabia’s announcement that it would voluntarily withhold another 1 million barrels/day of oil production starting in July. The pullback appears to be rooted in the ongoing concerns over global demand after a soft PMI report for May while markets start to focus on what the FED will do at its FOMC meeting next week.

The lack of follow through to the upside leaves petroleum futures stuck in neutral technical territory, and since the top end of the recent trading range didn’t break, it seems likely we could see another test of the lower end of the range in the near future.  

RIN prices have dropped sharply in the past few sessions, with traders apparently not waiting on the EPA’s final RFS ruling – due in a week – to liquidate positions. D6 values dropped to their lowest levels in a year Monday, while D4 values hit a 15-month low. In unrelated news, the DOE’s attempt to turn seaweed into biofuels has run into a whale problem.  

Valero reported a process leak at its Three Rivers TX refinery that lasted a fully 24 hours.  That’s the latest in a string of upsets for south Texas refineries over the past month that have kept supplies from San Antonio, Austin and DFW tighter than normal. Citgo Corpus Christi also reported an upset over the weekend at a sulfur recovery unit. Several Corpus facilities have been reporting issues since widespread power outages knocked all of the local plants offline last month.  

Meanwhile, the Marathon Galveston Bay (FKA Texas City) refinery had another issue over the weekend as an oil movement line was found to be leaking underground but does not appear to have impacted refining operations at the facility. Gulf Coast traders don’t seem concerned by any of the latest refinery issues, with basis values holding steady to start the week.

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