EU Agrees To Recovery Plan To Ease Economic Downturn
Energy bulls should thank our friends across the pond for today’s early buying action. The EU has agreed to a €750 billion recovery plan to ease the recent economic downturn. The combination of grants and loans are mainly aimed at member countries that were already in a pickle hit the hardest by COVID-19 such as Italy, Spain and Greece.
Not to be outdone by its former Union mates, news out of the England breathes new hope in the hunt for a viable vaccine. The University of Oxford has taken a big step in the way of developing an injection that triggers an immune response in humans. While they say it is too soon to gauge its widespread viability, the UK has already ordered 100 million doses.
There are two tropical disturbances we will be keeping our eye on for the next few days. The closest is just over Havana but only has a 30 percent chance of cyclonic formation over the next 48 hours. The second, this one with a 60 percent chance in the next two days, is churning in the mid-Atlantic, just north of the Equator. The later we get into the year the more popular this area becomes as a starting point for hurricanes.
Risk-on sentiment fueled by hope has caused some promising technical action in refined product futures prices this morning. RBOB and HO futures have both broken through their respective 10-day moving average, with RBOB busting its 20-day as well and HO setting new monthly highs. Both contracts, however, have about a dime left to climb to close the chart gap set back in early March, a significant test of recovery for energy prices and overall trading sentiment.
Click here to download a PDF of today's TACenergy Market Talk.
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Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
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Week 47 - US DOE Inventory Recap
Energy Prices Were Seeing Some Modest Selling Overnight Following A Cease-Fire Agreement Between Israel And Hamas
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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.
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.