Energy Futures Saw A Big Pullback Overnight Turn Into Modest Gains This Morning

Market TalkTuesday, Mar 22 2022
Pivotal Week For Price Action

After a strong Monday session, energy futures saw a big pullback overnight turn into modest gains this morning. It’s been another wild ride for diesel prices, which have already seen a 24 cent price swing in the overnight session, as concerns over a systemic shortage of diesel globally keeps buyers engaged, while disagreements over European fuel sanctions seems to be giving some reason for prices to pull back after rallying 95 cents in the past week.

The overnight pullback may also have to do with reports that the US had sent patriot missile systems to Saudi Arabia to meet an “urgent request”. That delivery may serve to both protect energy infrastructure that’s been attacked by Houthi rebels, and to encourage the Saudi’s to play nice with the US and perhaps increase oil output where it can. 

Time for a do-over? The FERC seems to be re-considering the policy changes it published just a week before Russia invaded Ukraine that made the approval process for natural gas pipelines nearly impossible. A WSJ article from a former FERC counsel argues why the agency should take on a war-time stance to promote natural gas shipping, not hinder it.

The SEC has proposed new corporate disclosures that would require companies to report their direct carbon emissions, and estimate the indirect emissions from their operations, and estimate the risk of global warming on their operations. While the intent of this proposal is apparently to provide investors a gauge of the risk they’re investing in, it sounds like we’ll end up seeing more generic disclaimers in financial reports, like the forward Looking statements and other boiler plate risk disclosures included in most SEC filings already.

Is this why they’re moving to Texas? As retail gasoline prices in California approach $6/gallon, new attention is being put on the state’s LCFS and GHG programs that add 40-50 cents to each gallon of fuel.  Meanwhile, one of the dwindling number of refineries still operating in the state is now dealing with a worker strike. So far that doesn’t seem to be impacting local spot prices, which are easing after a huge spike last week as another refinery returns units from unplanned maintenance.

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Market Talk Update 3.22.22

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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.

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

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