Energy Prices Swing After Missile Launch

Market TalkWednesday, Jan 8 2020
Week 44 - US DOE Inventory Recap

If you went to bed early last night, you might see the early selling in energy markets as a sign that tensions in the Middle East are returning to a normal level. Of course, if you’re reading this, you already know that’s not the case, and that prices swung more than 10 cents overnight after Iran launched missiles at U.S. military outposts in Iraq.

The key elements in the reversal from 8 cent overnight gains to 2 cent morning losses appear to be the lack of casualties from the attacks, the targeting of military assets not energy assets, and signals from the U.S. that no further retaliation is imminent. That said, both countries’ leaders will be making statements later today that could either continue to lower the tensions, or set the stage for the next round of violence, so it would not be surprising to see more volatile action.

Speaking of volatility, the Oil Volatility Index (OVX chart below) has spiked in the past week due to the escalating violence, but remains well below levels we saw most of last year, in another sign of the price buffer created by the world’s surplus of petroleum supply.

In fundamental news, the API was said to show large builds in refined products last week, with both gasoline and diesel stocks up more than six million barrels, while oil stocks were down one million barrels. Those types of product builds are consistent for this time of year when demand dies up, and would mark the largest weekly increase in gasoline stocks since this week a year ago, if confirmed by the DOE in their report due out at its regular time this morning.

While most eyes are focused on the action in futures, the west coast is heating up again as CARBOB basis values have surged nearly 20 cents this week, following unconfirmed reports of another refinery issue in the L.A. area.

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

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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.

Pivotal Week For Price Action
Market TalkWednesday, Sep 27 2023

Week 39 - US DOE Inventory Recap