Energy Futures Cooling Their Heels 11-5-2020

Market TalkThursday, Nov 5 2020
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After a strong 3-day recovery rally that’s added 14% or more to most contracts from Sunday night’s lows, energy futures are cooling their heels this morning with minor losses in the early going as the market appears to have moved back into wait and see mode.

While energy prices have stalled out, equity markets continue to rally even though the outcome of the US Presidential election remains in doubt. It seems that the rational for the push higher is that odds look favorable for a split congress, meaning that whoever wins the Presidential race will be limited in their capacity to make major changes. For a good quick read on the potential supply/demand impacts of the Presidential election, see this report from Rystad Energy.

Eta continues to churn over central America, and is expected to reform over the Caribbean this weekend, and Florida is still in the storm’s path for early next week. The forecast path has added a left turn in the past 24 hours, which could mean the storm will get into the Gulf of Mexico. Current models suggest a Florida panhandle landfall if that happens, which will keep the storm East of most energy supply infrastructure.

The silver lining of COVID & Hurricanes: While we’ll need to watch Eta for a few more days to make sure it doesn’t take another ominous turn, the reality is that even if it does hit oil production and refining operations (like Laura, Sally, Delta & Zeta did) the reduced demand in the country this year means most people won’t notice any issues with fuel supplies or prices. 

Yesterday’s DOE report provided more evidence for that phenomenon as demand continues to struggle through the fall, and requiring sharp pullbacks in both oil output and refining operations just to keep inventories at manageable levels. Ordinarily this time of year we’d expect refiners to be ramping up rates as they emerge from fall turnarounds, but this year instead we’re just waiting to see which plant will be next to announce it plans on shutting down for good.

The FOMC will be making another monetary policy announcement this afternoon, but nobody seems to care since the FED has already signaled it will be a long time before they consider raising rates again.

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



aTACenergy Market Update 11-5-2020

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Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

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

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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.