Crude Oil Futures Are Leading The Energy Complex Higher This Morning With WTI Jumping 2% And Exchanging Hands Above The $92

Market TalkWednesday, Sep 27 2023
Pivotal Week For Price Action

Crude oil futures are leading the energy complex higher this morning with WTI jumping 2% and exchanging hands above the $92 so far today. Gasoline is rallying in sympathy, trading nearly 5 cents higher than yesterday’s settlement (+1.8%), while ULSD plays the laggard, staying just on the green side of breakeven.

The rally in crude oil prices seems significant when equities saw their worst day in months yesterday and the US Dollar has pushed to highs not seen since last year. Diverging market moves between energy futures and equities is typically viewed as a sign of a healthy energy market since it’s assumed that price direction is following fundamental cues rather than those of a more technical or algorithmic nature. It will be interesting to see how the money managers’ positions change on the CFTC’s Commitment of Traders report.  

Invest AL91 continues to show signs of organization as it drifts west in the Atlantic. The National Oceanic and Atmospheric Administration gives it a 90% chance cyclonic development over the next 2 days, but most projections keep it out to sea with some showing it graze the Lesser Antilles. Tropical Storm Philippe is still hanging around and will likely make landfall in Puerto Rico as a Tropical Depression.

The American Petroleum Institute published their national inventory estimates yesterday afternoon, showing a ~1.6 million barrel build in US crude oil inventories, while gasoline and diesel stocks dropped 70,000 barrels and 1.7 million barrels, respectively. The Department of Energy’s official report is due out at its regular time this morning (9:30 CDT).

West Coast gasoline basis spiked yesterday as that side of the country grapples with refinery downtime and tight low RVP inventories heading into October. The P66 Wilmington and the PBF Torrance refineries are down for maintenance, on the heels of an unplanned flaring event at Chevron Los Angeles last Friday. LA CARBOB traded $1.87 over its NYMEX counterpart, and, judging by what happened last year, it may have higher to go.

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Market Talk Update 09.27.2023

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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. 

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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