August Trading Starts Off On Soft Note After Strong July

Market TalkMonday, Aug 2 2021
Pivotal Week For Price Action

Refined products dipped more than 3 cents overnight, starting August trading off on a soft note after a strong July. Don’t get too excited however as we’ve already seen those losses cut in half, and prices remain just one decent rally away from multi-year highs. 

Iran reportedly attacked an Israeli-operated fuel tanker off the coast of Oman over the weekend. 2 people were killed in the drone attack, making it the most serious of the numerous Iran-sponsored tanker attacks that have occurred over the past few years. The sabre rattling has begun with the US, Britain and Israel all promising a response, and Iran threatening to retaliate.  Hopefully this time they won’t shoot down a commercial airline jet by mistake.  

We’d like a do-over please: 2 weeks ago, hedge funds were bailing out of energy contracts after the biggest daily selloff in over a year. Last week, refined products saw net length held by money managers increase by more than 20% and Brent increased by 19% as prices bounced. The net position in ULSD is at its highest level since November 2018, which happens to be the last time diesel prices were trading this high. 

Meanwhile, hedge funds continue to steadily add to long bets in various environmental credits, with CCA and RGGI contracts both seeing new speculative longs added last week. CARB reported last week that LCFS deficits outstripped credits generated in the first quarter, reducing the overall credit bank by roughly 3%.

Baker Hughes reported a net decrease of 2 oil rigs last week, snapping a 4 week streak of increases. Of the 11 basins that Baker Hughes specifically notes in its weekly rig count, none had decreases, and in fact 2 increased, while the “other” category made up the decline, suggesting that the major plays continue to see slow but steady growth in activity despite the total weekly drop.

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Market Update (01A) 8.2.21

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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.

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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.