WTI And RBOB Futures Reach Highest Levels Since 2014

Market TalkTuesday, Jul 6 2021
Pivotal Week For Price Action

WTI and RBOB futures both reached their highest levels since 2014 overnight as a lack of unity from OPEC & Friends, an influx of investor money, and another renewable fuel court ruling, all seem to be helping push prices higher. Prices have pulled back since reaching those highs however, and there are some warning signals that a pullback may be coming soon.

OPEC & Friends failed for a third time to come up with an agreement on Monday as the UAE continues to act as a roadblock. While the market has reacted with higher prices following this news, it could in fact end up being bearish, as the fragile alliance was preventing too much supply hitting the market and without it, countries may overproduce to take advantage of prices trading at multi-year highs.

Tropical Storm Elsa is making its way across the Florida keys this morning, with winds around 60 miles an hour. The Storm is expected to pass near the port of Tampa overnight and make landfall sometime Wednesday. The path keeps the storm far away from any refineries or off shore production so should not a non-factor for supply.

Money managers continued their recent trend of increasing net length (bets on higher prices for refined products, but reducing them for Crude oil. RBOB gasoline contracts led the buying last week as the large speculative trader category increased their long positions by 10%, jumping on the high gasoline price bandwagon as prices reached 7 year highs.  

Baker Hughes reported 3 more oil rigs were put to work last week. That puts the total U.S. oil rig count up 191 from a year ago, when prices were fighting to get back to $40 per barrel. Then again, the rig count is 412 less than it was 2 years ago, when prices were around $56, nearly $20/barrel less than where they are trading today. 

RINs had another choppy session on Friday, starting the day under more selling pressure only to rally in the afternoon following a court ruling that invalidated E15 sales in the summer time. While E15 has had a hard time catching on outside of the Midwest, it does take another blending option off the table and reduce the availability of RINs to meet RFS obligations. Due to the early selling in RINs we saw Friday, the nickel move higher in values won’t show up until tonight’s assessment.

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Market T 7.6.21

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Pivotal Week For Price Action
Market TalkFriday, Mar 24 2023

Correlation Confusion Between Oil, Stock, And Currency Markets; US Drops Plan to Replenish SPR

Oil prices are leading a slide lower to end the week after the US government walked back plans to buy oil since it’s dropped below $70, and the latest ripples in the banking crisis push stocks lower and the dollar sharply higher after it touched a 2-month low Thursday. 

Even though the correlation between energy prices and stocks or currencies has been weak lately, or even opposite of normal in the case of the dollar, there still seems to be more influence lately as the fear trade has funds flowing back and forth between markets depending on whether or not risk-taking is in style that day. 

The US Energy Secretary told congress that the agency won’t be refilling the SPR this year, despite previous pledges by the White House to buy oil when it dropped to $70, since the agency is still working through congressionally mandates sales of oil from the reserve.  That news seems to be contributing to the downside in WTI and Brent prices as traders hoping to front run the DOE are now going to have to wait a while longer to do so.

Even though ULSD prices are up 17 cents from the lows set last week, they’re still on the verge of their lowest weekly settlement since January of 2022 should prices end the day near current levels. Given that this week’s recovery rally failed to take out the highs seen in previous weeks, charts continue to look bearish for distillates. Another run at $2.50 looks more likely and a break below that level, when the May contract takes the prompt position in another week, may be a foregone conclusion.

As has been the case for most of March, RBOB look as bad as ULSD on the charts, although that certainly isn’t helping so far today with gasoline futures outpacing the losses in diesel.  Unless we see RBOB end the day down a dime or more (it’s down a nickel currently) the weekly trend will still be higher, and the charts will still be giving favor to another push towards $2.80-$3 this spring.

The LA spot market saw a healthy bounce in gasoline basis values Thursday following multiple refinery upsets in the area reported to local regulators. Meanwhile, the California Governors new plan to create an oversight committee to prevent price gouging – a major change from earlier proposals to levy a new tax on oil producers and refiners – passed through the Senate on Thursday. If this new bill is fully passed, it will allow the Governor to appoint that committee himself. A 1,000-page prediction of how that plan will work is available for less than $10 on Amazon.

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

Pivotal Week For Price Action
Market TalkThursday, Mar 23 2023

FOMC Rate Increase Rocks Equity Markets, Energy Futures Unshaken

Stocks didn’t like the FOMC’s move to increase the fed funds rate by 25 points even as it acknowledged that recent banking developments will weigh on economic activity, or the economic projections that showed inflation expectations moving higher than previously forecast and had their worst day in 2 weeks following those announcements. 

Even though energy and equity markets have seen their correlation strengthen in March following the banking crisis, the drop in equities did little to slow the recovery rally in energy that stretched to a third day Wednesday. We are seeing a more cautious start this morning with both WTI and ULSD seeing modest losses early, while RBOB continues to push higher for a 4th day. 

Gasoline futures are seeming to get a small boost from reports that Monroe was forced to shut an FCC unit at its Trainer PA refinery following a fire Monday. As the charts below show, PADD 1 refinery runs are already at the low end of their seasonal range due to turnaround work at the P66 Bayway facility. Prices to ship products on Colonial have been trading in negative territory lately, and gasoline traders will not want to buy Gulf Coast barrels that have already transitioned to summer grades and bring them to the East Coast that still has a few weeks left to sell winter-grade product, but if this outage is extended, we could see that change next week.

Reports suggest 13% of French fueling stations are tight on supply due to the continuing refinery strikes, with some regions seeing as many as half of their stations out of fuel. The supply disruptions continue to get minimal reaction from global markets with only modest strengthening in time and crack spreads observed so far.  A glut of distillates in Asia, as the Eastern hemisphere deals with an influx of Russian exports (aka the opposite problem the Western hemisphere had last year) is contributing to the lack of reaction to the latest supply disruption.

The EIA reported another 2 million barrels/day of crude oil inventory adjustments last week, while strong exports held domestic inventories steady despite another 14 million barrels being found.  The agency also released its report on its findings for the rapidly growing adjustment, and its plan to update its weekly survey to help the data make more sense. The report admits that the agency has been inadvertently overstating domestic petroleum consumption, by counting light hydrocarbons and unfinished oils blended into crude as if they’ve been used by consumers, which explains the “record high” total demand even while refined products have seen declines in their figures.

Both gasoline and diesel demand did see healthy increases last week, marking a 2nd straight week of improving numbers for both. Diesel consumption is still at the low end of its seasonal range despite two weeks of growth in the EIA’s estimates, while gasoline is just below its 5-year average for this time of year. Retail prices for both are now approaching $1/gallon less than they were a year ago, which should help give a boost to consumption as we move further into spring.

PADD 5 refinery runs saw another healthy increase last week, and a tick up in imports, both of which might help explain the big declines in gasoline and diesel basis values we’ve seen in the past two weeks.  In addition, Wednesday saw a pipeline deal for RD99 executed in the LA market, which will certainly be the first of many as that rapidly increasing supply comes to market. ULSD values did recover from Tuesday’s attempt to liquidate with no liquidity that briefly pushed values down a theoretical 45 cents for the day, although prompt values are still going for 20+ cent discounts to April futures.


The EIA did not yet report Exxon’s 250,000 barrel/day expansion at its Beaumont facility, even though those units have been running for several weeks now. The facility did report an upset in a hydrocracker unit Wednesday, although the impact of that event is still unclear.

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
Market TalkWednesday, Mar 22 2023

Energy Futures Mixed Ahead Of DOE Report And Fed Announcement

Energy futures were calmly waiting on the FED’s 1pm announcement, like many markets around the world, with small and mixed results overnight. Diesel started to make a more meaningful rally attempt as we approach 8am central, moving higher for a 5th straight session, with stronger spreads signaling that refinery disruptions in Europe may finally be having some impact on prices now that most of the banking fears seem to have subsided.   

The CME’s Fedwatch tool shows that expectations for a rate increase have risen in the past week, with just 10% betting the FED will hold rates steady today compared to 45% a week ago when the banking crisis was stirring all sorts of fears.  It’s worth noting that there’s a 60% probability that the FED will raise rates by 50 points over the next 3 meetings, then 50% odds that rates will end up lower than they are now by the end of the year. 

The API estimated gasoline stocks dropped by 1 million barrels last week, while diesel declined by 1.8 million. Crude oil inventories increased by 3.2 million barrels on the week as production held steady near 12.2 million barrels/day. The EIA’s weekly report is due out at its normal time this morning. The agency is still struggling to get a consistent and accurate tally on crude oil inventories due to the growing impact of condensate production on both inventory and export readings. We should also see the largest increase in refinery capacity reported today after Exxon officially brought its new 250mb/day units online at Beaumont TX last week.

France is attempting to requisition refinery workers to get them back on the job and get energy supplies flowing again. After 2 weeks of strikes, the impacts on diesel and crude prices are starting to appear, albeit in much less dramatic fashion than we saw last fall. Both time spreads and crack spreads for diesel have been marching higher over the past week but remain just a fraction of what we saw last year.

The last day of March pipeline trading brought fireworks in the LA spot market Wednesday with a seller of EPA ULSD #2 trapped without any buyers and offering prices all the way down to a 50 cent/gallon discount to futures without a trade ever getting done. Meanwhile multiple bidders for CARB ULSD #2 appeared but no offers at the suddenly huge discounts appeared, leaving the market dislocated, and those making price assessments grasping for straws.   

April cycles should bring more liquidity, and many traders will be returning to the office following the annual AFPM (RIP NPRA) conference, so we should get a better feel for reality today. That said, more big swings are possible however as pipeline space to bring barrels east from LA is maxed out and a scramble for CBG gasoline to supply Phoenix taking up much more capacity than normal due to refinery downtime in other markets may leave diesel stuck at its origin points and put downward pressure on spot prices for the next month or so. The good news for consumers on the West Coast is that wholesale diesel prices are now down more than $2/gallon from where they were 6 months ago, which should help alleviate some of the pain they were feeling last year when retail values surged north of $6.

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