Energy Markets Are Moving Sharply Higher Tuesday, Erasing Most Of The Large Losses From Monday’s Session

Market TalkTuesday, Apr 12 2022
Pivotal Week For Price Action

Energy markets are moving sharply higher Tuesday, erasing most of the large losses from Monday’s session. An uptick in fighting in the Ukraine, some relaxation in Shanghai’s COVID lockdown restrictions, and a reminder from OPEC that help is not on the way are all getting some credit for the big bounce in futures. From a technical perspective, this bounce keeps the weekly trend-lines intact, and keeps the door open for another significant move higher in the next few weeks. 

An announcement from the White House is getting lots of headlines over a largely meaningless approval of E15, in an attempt to lower gasoline prices/garner some votes while largely ignoring a more impactful shift in biofuel production options. 

The approval of E15, which had already been approved under the previous administration, only to have that approval struck down by the courts, probably won’t change much as the markets equipped and eager to move more ethanol (aka the Midwest corn growing states) are already relatively well supplied with gasoline vs the coastal markets, that are having just as hard a time finding ethanol due to logistical bottlenecks with rail cars and trucks as they are finding extra gasoline. There’s also that dirty little detail that ethanol blends may actually pollute more than gasoline, particularly higher blends in the warmer months, that continues to be an inconvenient detail when the world suddenly cares more about high prices than climate change.

Meanwhile, buried in the last paragraph of the White House announcement, and ignored by the headlines, was word that the EPA is proposing approval of Canola Oil as an “advanced biofuel” feedstock for Renewable Diesel and SAF. This move could be significant as some claim that Canola can produce 4X the oil per acre as soybeans, and should help alleviate some of the stress on feedstock supplies if the EPA’s pathway is approved later this year. 

OPEC’s monthly oil market report is due out later this morning. Last month’s report took an unusual but honest approach to forecasting, saying they simply weren’t yet able to predict the impact to demand caused by the fallout from Russia’s invasion of Ukraine. Yesterday, cartel officials told the EU that they would be unable to replace Russian oil exports, which could create one of the worst oil supply shocks ever. 

The EIA this morning gave a good reminder of how globally intertwined US energy supplies are, reporting that both imports and exports of petroleum products increased last year. Other petroleum products continue to be the largest mover of both imports and exports as petrochemicals to support numerous non-transportation-related items continues to grow even as the world tries to go green. 

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Market Talk Update 4.12.22

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Pivotal Week For Price Action
Market TalkMonday, Oct 2 2023

Gasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading

Gasoline futures are leading the energy complex higher this morning with 1.5% gains so far in pre-market trading. Heating oil futures are following close behind, exchanging hands 4.5 cents higher than Friday’s settlement (↑1.3%) while American and European crude oil futures trade modestly higher in sympathy.

The world’s largest oil cartel is scheduled to meet this Wednesday but is unlikely they will alter their supply cuts regimen. The months-long rally in oil prices, however, has some thinking Saudi Arabia might being to ease their incremental, voluntary supply cuts.

Tropical storm Rina has dissolved over the weekend, leaving the relatively tenured Philippe the sole point of focus in the Atlantic storm basin. While he is expected to strengthen into a hurricane by the end of this week, most projections keep Philippe out to sea, with a non-zero percent chance he makes landfall in Nova Scotia or Maine.

Unsurprisingly the CFTC reported a 6.8% increase in money manager net positions in WTI futures last week as speculative bettors piled on their bullish bets. While $100 oil is being shoutedfromeveryrooftop, we’ve yet to see that conviction on the charts: open interest on WTI futures is far below that of the last ~7 years.

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

Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures

The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.

The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.

We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.

The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.

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

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day

The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.

There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.

As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.

Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.

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