Energy Prices Were Seeing Another Healthy Selloff Overnight

Market TalkWednesday, Aug 10 2022
Pivotal Week For Price Action

9:30 am update

Gasoline prices have jumped since the weekly DOE report, and our emails seem to be back up finally, both of which are exciting.

Import/export flows are factoring heavily into the weekly stats with Gasoline exports accounting for half of the inventory draw down, while a decline in distillate and crude oil exports on the week explains why those products gained.    Refinery runs increased in every PADD, with PADD 1 rates jumping 10% on the week, no doubt due to PBF restarting the crude unit at their NJ facility that had been shuttered due to weak economics last year.  

From the 8am market update:

Energy prices were seeing another healthy selloff overnight, after a big Tuesday rally, but have since cut those losses following the latest reading on inflation in the US.

Gasoline and crude prices both turned positive, Diesel nearly wiped out 10 cent losses and stock markets rallied sharply this morning after the July CPI reading came in unchanged for the month, a sign that US inflation has peaked, and that the FED can take it easy on free money crowd.   The drop in gasoline and other fuel prices was the main driver of cooling inflation in July, while prices for food and shelter both continued to increase. 

Another large part of the yo-yo action in prices the past couple of days is being blamed on flows of Russian oil to several land-locked European nations.   Tuesday, Russia’s pipeline company Transneft announced that flows on that pipeline were being cut since sanctions prevented payment for that fuel, and that coincided with the strong price rally.  This morning, Hungary announced it was paying fees to allow shipments to resume temporarily, and prices are moving lower once again. 

Another factor stirring up the action in Diesel prices this week:  Low water levels on the Rhine river are disrupting one of Europe’s most crucial arteries for transporting energy supplies, right when the continent can least afford another supply snag.

Speaking of which, NY Harbor gasoline prices continue to trade 40 cents or more above their Gulf Coast counterparts, with a steeply backwardated curve hanging on for another week.   This unusual phenomenon was highlighted in the DOE/EIA’s Short Term Energy Outlook this week, noting how refinery shutdowns along the East Coast of Canada and the US and reduced imports from Europe due to their energy crisis are both contributing to this phenomenon.

The monthly STEO also highlighted the tight global market for distillates, with the major supply centers in the US, Europe and Asia all holding 30-40% less inventory than their 5 year averages.  The report does predict that rising output in the US should help inventories to heal modestly in the coming month, but highlights the threat that the looming hurricane season pose to those estimates.

Speaking of which, the area of storms moving across the Atlantic currently known as Invest 97L was downgraded overnight and now has only a 30% chance of getting a real name this week.  If that system is named, long range projections peg it moving towards the East Coast, rather than into the Gulf of Mexico, which is good news for oil producers and refiners, but bad news for the beleaguered region that’s been struggling to get fuel supplies caught up ever since the start of the war in Ukraine.  

The API reported builds in crude oil and distillate inventories last week of 2.1 and 1.4 million barrels respectively, while gasoline stocks drew by 600,000 barrels.  The DOE/EIA’s version of the weekly status report is due out at its normal time this morning.

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

Market Talk Update 08.10.22

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Market TalkThursday, Mar 28 2024

Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

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

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Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

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