Cocktail Of Bullish Headlines Push Markets Higher

Market TalkWednesday, Aug 25 2021
Pivotal Week For Price Action

Optimism abounds this week as a cocktail of bullish headlines push energy and equity markets higher for a third day. Markets around the world cheer improving COVID stats, the official approval of a vaccine, the reopening of the world’s 3rd largest port, and energy markets are getting an added boost from inventory declines and another hurricane threat.

While this 3 day rally, that’s added 20 cents or more from Friday’s lows, has taken the chance of a technical collapse off the table near term, there’s still work to be done to eliminate the longer threat of a lower trend. Peg the starting levels of the 7 day selloff as the targets we’ll need to see broken if the bulls want to take back control longer term. RBOB futures will transition to the winter grade spec next week, which will knock 13 cents off of prompt values. If you’re wondering why gasoline basis values in your local market suddenly jumped in the past couple of days, odds are physical trades in your region are now referencing the October RBOB contract.  

It looks like there’s a good chance we could see a hurricane heading towards the US Gulf Coast next week. The storm system in the Caribbean that was given just 20% odds of development a few days ago, now has 80% odds of developing and early models have it pointed anywhere from Northern Mexico to Corpus Christi, Houston, or perhaps even Louisiana as we mark the 4 year anniversary of Hurricane Harvey. The name of this storm, assuming it develops, will likely be Ida, but could be Julian if one of the other 2 storms churning over the Atlantic is named first. Neither of those appears to be a threat to the US at this point.

It’s another week of small changes from the API report, which was said to show inventory drawdowns across the board last week.  Crude oil inventory dropped by 1.6 million barrels, gasoline was down almost 1 million barrels, and distillates dropped by 245,000 barrels. The DOE’s weekly report is due out at its normal time today.  

Add another renewable diesel project to the pile: Exxon’s subsidiary Imperial oil announced a new plan to co-produce renewable diesel at its refinery in Edmonton, expanding the company’s strategy of co-producing rather than converting its existing facilities as we’ve seen other refiners do. Canada’s Clean Fuel Standard takes effect next year, giving more financial incentive for this type of investment, and adding to the competition for feedstocks and renewable products that’s pulling traditional biodiesel away from the US markets that don’t have a credit program to offset the higher costs of those fuels.

Speaking of which, after RINs got hammered last week when reports suggested the EPA was going to lower its RFS target for 2021, and raise it for 2022, we’re seeing values gap higher this morning, with trades already 18 cents above Monday’s lows. With this type of move, odds are we’ll see another update on the EPA’s plans (or lack of) later this morning.

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

Market Update 8.25.21

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Market TalkFriday, Jul 19 2024

Summertime-Friday-Apathy Trade Influencing Energy Markets

Energy markets are treading water to start the day as the Summertime-Friday-Apathy trade seems to be influencing markets around the world in the early going. RBOB futures are trying for a 3rd straight day of gains to wipe out the losses we saw to start the week, while ULSD futures continue to look like the weak link, trading lower for a 2nd day and down nearly 3 cents for the week.

Bad to worse: Exxon’s Joliet refinery remains offline with reports that repairs may take through the end of the month. On top of that long delay in restoring power to the facility, ENT reported this morning that the facility has leaked hydrogen fluoride acid gas, which is a dangerous and controversial chemical used in alkylation units. Chicago basis values continue to rally because of the extended downtime, with RBOB differentials approaching a 50-cent premium to futures, which sets wholesale prices just below the $3 mark, while ULSD has gone from the weakest in the country a month ago to the strongest today. In a sign of how soft the diesel market is over most of the US, however, the premium commanded in a distressed market is still only 2 cents above prompt futures.

The 135mb Calcasieu Refinery near Lake Charles LA has been taken offline this morning after a nearby power substation went out, and early reports suggest repairs will take about a week. There is no word yet if that power substation issue has any impacts on the nearby Citgo Lake Charles or P66 Westlake refineries.

Two tanker ships collided and caught fire off the coast of Singapore this morning. One ship was a VLCC which is the largest tanker in the world capable of carrying around 2 million barrels. The other was a smaller ship carrying “only” 300,000 barrels (roughly 12 million gallons) of naphtha. The area is known for vessels in the “dark fleet” swapping products offshore to avoid sanctions, so a collision isn’t too surprising as the vessels regularly come alongside one another, and this shouldn’t disrupt other ships from transiting the area.

That’s (not) a surprise: European auditors have determined the bloc’s green hydrogen goals are unattainable despite billions of dollars of investment, and are based on “political will” rather than analysis. Also (not) surprising, the ambitious plans to build a “next-gen” hydrogen-powered refinery near Tulsa have been delayed.

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

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Market TalkThursday, Jul 18 2024

Refined Products Stanch Bleeding Despite Inventory Builds And Demand Slump

Refined products are trading slightly lower to start Thursday after they stopped the bleeding in Wednesday’s session, bouncing more than 2 cents on the day for both RBOB and ULSD, despite healthy inventory builds reported by the DOE along with a large slump in gasoline demand.

Refinery runs are still above average across the board but were pulled in PADD 3 due to the short-term impacts of Beryl. The Gulf Coast region is still outpacing the previous two years and sitting at the top end of its 5-year range as refiners in the region play an interesting game of chicken with margins, betting that someone else’s facility will end up being forced to cut rates before theirs.

Speaking of which, Exxon Joliet was reportedly still offline for a 3rd straight day following weekend thunderstorms that disrupted power to the area. Chicago RBOB basis jumped by another dime during Wednesday’s session as a result of that downtime. Still, that move is fairly pedestrian (so far) in comparison to some of the wild swings we’ve come to expect from the Windy City. IIR via Reuters reports that the facility will be offline for a week.

LA CARBOB differentials are moving in the opposite direction meanwhile as some unlucky seller(s) appear to be stuck long and wrong as gasoline stocks in PADD 5 reach their highest level since February, and held above the 5-year seasonal range for a 4th consecutive week. The 30-cent discount to August RBOB marks the biggest discount to futures since 2022.

The EIA Wednesday also highlighted its forecast for rapid growth in “Other” biofuels production like SAF and Renewable Naptha and Propane, as those producers capable of making SAF instead of RD can add an additional $.75/gallon of federal credits when the Clean Fuels Producer’s Credit takes hold next year. The agency doesn’t break out the products between the various “Other” renewable fuels, but the total projected output of 50 mb/day would amount to roughly 2% of total Jet Fuel production if it was all turned to SAF, which of course it won’t as the other products come along for the ride similar to traditional refining processes.

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

Pivotal Week For Price Action
Market TalkWednesday, Jul 17 2024

Week 28 - US DOE Inventory Recap