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 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.