Crude Oil And Gasoline Prices Attempt To Regain Balance After Tuesday's Wipeout

Market TalkThursday, Mar 9 2023
Pivotal Week For Price Action

Gasoline and crude oil prices are trying to find their footing after Tuesday’s wipe out led to more modest selling on Wednesday, while diesel prices continue to languish just a few cents above their lows for the year. Yesterday’s DOE report did little to assuage the fears of recession that have been gripping markets this week with a big slide in demand estimates and inventories that are healing much faster than most predicted this year. 

The DOE’s estimate for diesel demand plummeted to the lowest level of the year last week, dropping far below its seasonal 5-year range. Gasoline also saw a decline in its demand estimate, dropping from a healthy top of range figure last week to below the 5-year average last week. While a single week’s data point from the DOE can be misleading, particularly the “implied demand” figures which are simply an estimate based on the remainders left behind from the other reported figures from suppliers, there is no doubt that the demand trend for 2023 is troubling for suppliers thus far. 

Refinery runs ticked modestly lower for a 4th straight week, but the changes are very small and amount to not much more than rounding errors.  The increased capacity at Exxon’s newly expanded Beaumont facilities are still not showing up in the numbers, despite reports that the new units are online, which suggests we could see a large increase in refinery runs in the coming weeks.  It’s also interesting that PADD 4 refinery runs dropped noticeably last week, despite the fact that Suncor is restarting its commerce city facilities after a 2-month shutdown.

Gasoline and diesel exports both saw healthy increases last week but remain in their seasonal ranges and not pushing record highs like they did for much of last year when the world started scrambling to replace Russian supplies. The EIA’s This week in Petroleum note highlighted the record setting exports of refined products from the US last year and detailed how Propane and HGL’s are taking more share of those product flows.

That report also shows that US retail prices for diesel dropped below year-ago levels last week, as pump prices finally caught up to the plunge in wholesale values this year and we’re now comparing prices to last year’s chaotic events that were smashing records for volatility and daily price swings.

US Crude oil inventories did see their first weekly decline of the year, even though refinery runs and exports both declined. Oil production did see a small decline, but the main driver was a huge drop of 2.6 million barrels/day in the “adjustment” factor on inventories for the week.   

French pension strikes continue to limit fuel output at several refineries, while some other facilities report they’ve still been able to operate this week. The lack of reaction from fuel prices compared to what we saw last fall is another example of how supplies have healed in the past 6 months, and how reactions to events can differ greatly depending on the trend in place at the time.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Market Talk Update 03.09.2023

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Pivotal Week For Price Action
Market TalkTuesday, Nov 28 2023

Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week

The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday. 

Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.

Reversal coming?  Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.

Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness. 

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

Pivotal Week For Price Action
Market TalkMonday, Nov 27 2023

After Another Black Friday Selloff Pushed Energy Futures Sharply Lower In Last Week’s Holiday-Shortened Trading

After another Black Friday selloff pushed energy futures sharply lower in last week’s Holiday-shortened trading, we’re seeing a modest bounce this morning. Since spot markets weren’t assessed Thursday or Friday, the net change for prices since Wednesday’s settlement is still down more than 6-cents for gasoline and almost 5-cents for diesel at the moment.

OPEC members are rumored to be nearing a compromise agreement that would allow African producers a higher output quota. Disagreement over that plan was blamed on the cartel delaying its meeting by 4-days last week which contributed to the heavy selling. The bigger problem may come from Russia, who announced plans last week to increase its oil output once its voluntary cut agreement ends now that price cap mechanisms are proving to be ineffective

While an uneasy truce in Gaza held over the weekend, tensions on the Red Sea continued to escalate with the US Navy intervening to stop another hijacking and being rewarded for its efforts by having missiles fired at one of its ships.  

RIN values came under heavy selling pressure Wednesday afternoon following a court overturning the EPA’s ruling to deny small refinery hardship waivers to the RFS. Those exemptions were a big reason we saw RINs drop sharply under the previous administration, and RINs were already on due to the rapid influx of RD supply this year.

More bad news for the food to fuel lobby: the White House is reportedly stalling plans to allow E15 blending year-round after conflicting studies about ethanol’s ability to actually lower carbon emissions, and fuel prices. Spot prices for ethanol in Chicago reached a 2.5 year low just ahead of the holiday.  

Baker Hughes reported the US oil rig count held steady at 500 active rigs last week, while natural gas rigs increased by 3. 

The first of perhaps several refining casualties caused by the rapid increase in new capacity over the past two years was reported last week. Scotland’s only refinery, which has a capacity of 150mb/day is preparing to shutter in 2025.

The CFTC’s commitment of traders report was delayed due to the holiday and will be released this afternoon.

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

Pivotal Week For Price Action
Market TalkWednesday, Nov 22 2023

Week 47 - US DOE Inventory Recap