Drawdown Across Board In Energy Stockpiles

Market TalkThursday, Jun 20 2019
Heavy Selling In Energy Futures

A drawdown across the board in energy stockpiles as published by the Energy Information Administration, which came as a surprise to traders, took credit for the modest buying seen yesterday in refined products. Although crude oil posted a net decrease in national inventories, the build at Cushing, the delivery point for the WTI futures contract, actually added barrels last week, keeping the crude benchmark in the red for the day. Gas and diesel both posted gains on Wednesday with stocks moving lower by 1.7 million barrels and .6 million barrels respectively.

Lower crude oil prices seem to be weighing on producers as national crude output was down for a second week in a row for the first time since April. Whether or not increased military activity by Iran, the latest of which resulted in a downed US drone, will boost oil prices to the extent that seems to be their motive is yet to be seen. The aerial property damage is only the latest installment of the DC vs Tehran saga with previous episodes touching on increased US troop presence in the area, apparent sabotage of crude oil tankers, and Iran speeding up the production of nuclear materials.

The increased international tensions seems to be working today however, sending bout American and European crude prices higher by almost $2 per barrel. Refined product futures seem to be following the upward move with gas prices adding +$.03 per gallon and diesel rallying almost 4.5 cents.

Refinery runs in PADD 2 stole the show yesterday and toted a 10% bump in production rates last week. This latest bump out of a waterlogged Midwest boosted throughput to a seasonal 5-year high amid regional flood warnings that seem almost commonplace as of late. Furthermore, Ethanol stocks have seen their 5th consecutive weekly decline, as the entire farming industry struggles with the abnormally wet summer.

Crude and diesel futures have broken through their respective 20-day moving averages this morning, a technically significant resistance level that hasn’t been touched since late May. For both contracts, higher prices could be expected should prices settle above said level after today’s trading.

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Market TalkFriday, Jun 2 2023

Energy Prices Up Over 2% Across The Board This Morning

Refined product futures traded in an 8-10 cent range yesterday with prompt heating oil settling up ~6 cents and RBOB ending up about flat. Oil prices clawed back some of the losses taken in the first two full trading days of the week, putting the price per barrel for US crude back over the $70 mark. Prices are up just over 2% across the board this morning, signifying confidence after the Senate passed the bipartisan debt ceiling bill last night.

The EIA reported crude oil inventories up 4.5 million barrels last week, aided by above-average imports, weakened demand, and a sizeable increase to their adjustment factor. The Strategic Petroleum Reserve continues to release weekly through June and the 355 million barrels remaining in the SPR is now at a low not seen since September 1983. Exports increased again on the week and continue to run well above last year’s record-setting levels through the front half of the year. Refinery runs and utilization rates have increased to their highest points this year, both sitting just above year-ago rates.

Diesel stocks continue to hover around the low end of the 5-year range set in 2022, reporting a build of about half of what yesterday’s API data showed. Most PADDs saw modest increases last week but all are sitting far below average levels. Distillate imports show 3 weeks of growth trending along the seasonal average line, while 3.7 million barrels leaving the US last week made it the largest increase in exports for the year. Gasoline inventories reported a small decline on the week, also being affected by the largest jump in exports this year, leaving it under the 5-year range for the 11th consecutive week. Demand for both products dwindled last week; however, gas is still comfortably above average despite the drop.

The sentiment surrounding OPEC+’s upcoming meeting is they’re not likely to extend oil supply cuts, despite prices falling early in the week. OPEC+ is responsible for a significant portion of global crude oil production and its policy decisions can have a major impact on prices. Some members of OPEC+ have voluntarily cut production since April due to a waning economic outlook, but the group is not expected to take further action next week.

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Pivotal Week For Price Action
Market TalkThursday, Jun 1 2023

Prices Are Mixed This Morning As The Potential Halt In U.S. Interest Rate Hikes

Bearish headlines pushed refined products and crude futures down again yesterday. Prompt RBOB closed the month at $2.5599 and HO at $2.2596 with WTI dropping another $1.37 to $68.09 and Brent losing 88 cents. Prices are mixed this morning as the potential halt in U.S. interest rate hikes and the House passing of the US debt ceiling bill balanced the impact of rising inventories and mixed demand signals from China.

The American Petroleum Institute reported crude builds of 5.2 million barrels countering expectations of a draw. Likewise, refined product inventories missed expectations and were also reported to be up last week with gasoline adding 1.891 million barrels and diesel stocks rising 1.849 million barrels. The market briefly attempted a push higher but ultimately settled with losses following the reported supply increases implying weaker than anticipated demand. The EIA will publish its report at 10am this morning.

LyondellBasell announced plans yesterday to delay closing of their Houston refinery, originally scheduled to shut operations by the end of this year, through Q1 2025. The company “remains committed to ceasing operation of its oil refining business” but the 289,000 b/d facility remaining online longer than expected will likely have market watchers adjusting this capacity back into their balance estimates.

Side note: there is still an ongoing war between Russia and Ukraine. Two oil refineries located east of Russia's major oil export terminals were targeted by drone attacks. The Afipsky refinery’s 37,000 b/d crude distillation unit was struck yesterday, igniting a massive fire that was later extinguished while the other facility avoided any damage. The attacks are part of a series of intensified drone strikes on Russian oil pipelines. Refineries in Russia have been frequently targeted by drones since the start of the military operation in Ukraine in February 2022.

Pivotal Week For Price Action
Market TalkThursday, Jun 1 2023

Week 22 - US DOE Inventory Recap