Fear Takes Control After Months Of Hope-Fueled Trading

Market TalkTuesday, Mar 23 2021
Pivotal Week For Price Action

After months of hope-fueled trading, fear seems to be taking back control of the price action as equity and energy markets both face selling pressure this morning sparked by new COVID outbreaks and their accompanying lockdowns

The charts look treacherous for petroleum contracts, with a drop to the $52 range for WTI – which would mean another 15-20 cents of downside for refined products – looking likely if prices settle below last week’s low trades.  

The irony of this sell-off is it’s coming at a time when supplies for the Atlantic coast, which is home to the Nymex delivery hub for RBOB and ULSD futures contracts, is facing multiple supply disruptions from unrelated pipeline issues. Buckeye’s line in New York still remains down after last week’s spill, and Colonial’s line into New Jersey is running at reduced rates due to a lack of push stock from the Gulf Coast, causing premiums for offline barrels in the region to soar. 

After a big selloff last week, RIN prices made a strong recovery Monday rallying by nearly 10 cents for both D6 and D4 values. That bounce means the trend that’s added more than $1/RIN since August is still alive and well.  That said, RINs will face a big test today as the drop in petroleum prices will tend to put downward pressure on those values as the relative value for imports and exports will change with the spread between products. 

Oil industry executives joined a virtual meeting with the President Monday and supported an plan to put a price on carbon emissions as a way to combat climate change. There’s still no clear plan for what that might look like, but a priority for the industry is to push towards a unified market, rather than the segmented requirements that are popping up now around the world. Speaking of which, the fledgling RGGI program attempting to band North East States together in a climate pact to reduce emissions from the power sector saw prices for its CO2 credits reach a new high in March according to a new EIA report.

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

TACenergy MarketTalk 032321

News & Views

View All
Pivotal Week For Price Action
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.

Pivotal Week For Price Action
Market TalkWednesday, Mar 27 2024

Week 12 - US DOE Inventory Recap

Pivotal Week For Price Action
Market TalkWednesday, Mar 27 2024

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.