Energy Futures Slipping Modestly Lower
Energy futures are slipping modestly lower to start Thursday’s session, weighed down by reports of more large inventory builds in the US and new concerns over the Chinese economy (the largest energy importer in the world) slowing down.
Those bearish influences seem to be outweighing new turmoil in Venezuela, although prices have had a hard time making up their mind this week, and continue to bounce back and forth within their recent trading range, so a mid-day reversal would not be surprising.
The API was said to show large inventory builds across the board last week of more than 6.5 million barrels of crude oil, 3.6 million barrels of gasoline, and 2.5 million barrels of distillates. Futures prices had been having a strong afternoon Wednesday, bouncing again off early morning lows, but were knocked back down after the API data was released.
The Venezuelan saga took a dramatic turn Wednesday as a new self-appointed President was recognized by several foreign countries, including the US, and large demonstrations broke out opposing the current regime. Even though Venezuela has more proven oil reserves than any country on the planet, oil markets seemed to shrug off the news.
It’s certainly possible that an attempt at regime change could be bullish near-term as it puts the country’s last million barrels/day of production at risk, but it could be bearish long term if a more competent government can restore production to previous levels near 3 million barrels/day.
Short term it’s US Gulf Coast refiners that could see the biggest impact from a drop in Venezuelan crude exports, as those heavy barrels have few natural replacements, and could mean either paying a hefty premium for an ideal replacement, or having to reduce run rates if one can’t be found.
Speaking of Gulf Coast Refiners, spot markets have been behaving as though there’s suddenly a shortage of products coming from the US refining hub. Both gasoline and diesel basis values for Gulf Coast origins are up a nickel or more in the past few weeks suggesting that there’s either been a healthy export demand to offset lackluster domestic consumption, large reductions in refinery runs, or perhaps both. We’ll find out which it is at 11am central when the DOE’s weekly status report is released.
In addition to the normal weekly report, the DOE/EIA is also releasing its annual energy outlook later this morning. No surprise here, the report is reported to project growing domestic production for Oil, Natural Gas & Renewables in the coming year.
Latest Posts
Energy Prices Up Over 2% Across The Board This Morning
Prices Are Mixed This Morning As The Potential Halt In U.S. Interest Rate Hikes
Week 22 - US DOE Inventory Recap
The Slide Continues This Morning With Fuel Futures Down Another 2% And Oil Down 3%
Social Media
News & Views
View All
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
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.