Energy Prices Struggle To Find A Bottom

Market TalkTuesday, Sep 22 2020
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Energy prices are struggling to find a bottom after an overnight bounce was erased in early trading Tuesday morning, adding to Monday’s heavy losses. The selling so far this week has wiped out roughly half of last week’s strong gains, and sets up more downside on the weekly charts if product prices can’t figure out a way to sustain a rally over the next few days. It’s a similar story for U.S. equity markets, after an afternoon bounce Monday limited the damage from a heavy morning sell-off, some overnight buying has given way to more selling, threatening a larger move lower in the coming weeks. 

Tropical Storm Beta weakened as it made landfall, which meant Texas refiners could maintain operations through the storm. Flooding is still a likely possibility over a wide area as this system moves slowly and dumps large amounts of rain, but besides slowing recovery efforts for areas impacted by Hurricane Laura, it’s not expected to have much impact on energy supply infrastructure. Hurricane Teddy is staying offshore from the East Coast, but causing dangerous currents that could present some minor challenges for shipping traffic. With tanks stuffed full already, those limited challenges should not show up at the terminal level. After this, it looks like we’ll get a brief respite from storms as the system churning near Florida is given only 10% odds of developing this week, and so far nothing new is brewing off the African coast. 

As the crack spread chart below shows, despite all of the refinery closures and port disruptions due to three storms in the past month, margins for plants along the U.S. Gulf Coast have barely moved, suggesting that healing for struggling refiners will have to come from the demand side of the economic equation. 

The Dallas FED published a look at the looming fiscal budget shortfalls facing most states as tax revenues have plunged during COVID. The report notes that states dependent on income taxes are faring worse than those (like Texas) that rely on sales tax and don’t charge an income tax. 

The EIA this morning took a look at how U.S. oil exports have been steadily dropping since reaching a record high in February. 

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

TACenergy MarketTalk 092220

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Market TalkTuesday, Nov 28 2023

Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week

The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday. 

Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.

Reversal coming?  Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.

Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness. 

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

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Market TalkMonday, Nov 27 2023

After Another Black Friday Selloff Pushed Energy Futures Sharply Lower In Last Week’s Holiday-Shortened Trading

After another Black Friday selloff pushed energy futures sharply lower in last week’s Holiday-shortened trading, we’re seeing a modest bounce this morning. Since spot markets weren’t assessed Thursday or Friday, the net change for prices since Wednesday’s settlement is still down more than 6-cents for gasoline and almost 5-cents for diesel at the moment.

OPEC members are rumored to be nearing a compromise agreement that would allow African producers a higher output quota. Disagreement over that plan was blamed on the cartel delaying its meeting by 4-days last week which contributed to the heavy selling. The bigger problem may come from Russia, who announced plans last week to increase its oil output once its voluntary cut agreement ends now that price cap mechanisms are proving to be ineffective

While an uneasy truce in Gaza held over the weekend, tensions on the Red Sea continued to escalate with the US Navy intervening to stop another hijacking and being rewarded for its efforts by having missiles fired at one of its ships.  

RIN values came under heavy selling pressure Wednesday afternoon following a court overturning the EPA’s ruling to deny small refinery hardship waivers to the RFS. Those exemptions were a big reason we saw RINs drop sharply under the previous administration, and RINs were already on due to the rapid influx of RD supply this year.

More bad news for the food to fuel lobby: the White House is reportedly stalling plans to allow E15 blending year-round after conflicting studies about ethanol’s ability to actually lower carbon emissions, and fuel prices. Spot prices for ethanol in Chicago reached a 2.5 year low just ahead of the holiday.  

Baker Hughes reported the US oil rig count held steady at 500 active rigs last week, while natural gas rigs increased by 3. 

The first of perhaps several refining casualties caused by the rapid increase in new capacity over the past two years was reported last week. Scotland’s only refinery, which has a capacity of 150mb/day is preparing to shutter in 2025.

The CFTC’s commitment of traders report was delayed due to the holiday and will be released this afternoon.

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

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