Friday's Calm-Before-The-Storm Feeling

Market TalkFriday, Jul 2 2021
Pivotal Week For Price Action

There’s a calm-before-the-storm feeling to early trading in the energy markets Friday as we wait on more news from OPEC, and the first hurricane of the season.

As expected, the OPEC meeting has created volatility through uncertainty.  Yesterday we saw prices spike when Russia and Saudi Arabia couldn’t come to terms, only to see prices pull back when it was reported they’d found a suitable compromise on raising output gradually, and then prices have moved higher again this morning when the UAE was reportedly standing in the way of a deal

The day before a holiday weekend is often a quiet, low volume, trading session, which could mean more volatility later depending on what the cartel does or doesn’t agree to. 

Elsa is now a hurricane, continuing a trend we’ve become familiar with the past few years where storms get stronger than the early forecasting models suggest.  While that may be an ominous sign for the remainder of the Atlantic hurricane season, this storm’s path is still expected to stay well east of the oil production and refining zones in the Gulf of Mexico – and it will be interfered with while crossing the Antilles – so it should not be a major supply disrupter.  That said, there will be panic buying in parts of Florida that will create their own shortages, and given that the supply/demand balance is tighter than it’s been in several years and trucking capacity is tighter than ever, dealing with those localized issues will be a challenge. 

The June payroll report showed 850k more jobs added during the month, while the official unemployment rate ticked higher, in what seems like good news in that more people are once again looking for jobs.  The U-6 unemployment rate dipped from 10.2 to 9.8%.  Markets reacted positively to this news as it signals both continued recovery from COVID, and perhaps the end to the “why should I work” mentality feared from the trillions of dollars of stimulus that had been pumped into the economy over the past 15 months.

Today’s interesting read courtesy of Rystad Energy: Why the EV market is growing more reliant on Chinese battery components.

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

2021-07-02 8-36-42

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Market TalkFriday, Jul 19 2024

Summertime-Friday-Apathy Trade Influencing Energy Markets

Energy markets are treading water to start the day as the Summertime-Friday-Apathy trade seems to be influencing markets around the world in the early going. RBOB futures are trying for a 3rd straight day of gains to wipe out the losses we saw to start the week, while ULSD futures continue to look like the weak link, trading lower for a 2nd day and down nearly 3 cents for the week.

Bad to worse: Exxon’s Joliet refinery remains offline with reports that repairs may take through the end of the month. On top of that long delay in restoring power to the facility, ENT reported this morning that the facility has leaked hydrogen fluoride acid gas, which is a dangerous and controversial chemical used in alkylation units. Chicago basis values continue to rally because of the extended downtime, with RBOB differentials approaching a 50-cent premium to futures, which sets wholesale prices just below the $3 mark, while ULSD has gone from the weakest in the country a month ago to the strongest today. In a sign of how soft the diesel market is over most of the US, however, the premium commanded in a distressed market is still only 2 cents above prompt futures.

The 135mb Calcasieu Refinery near Lake Charles LA has been taken offline this morning after a nearby power substation went out, and early reports suggest repairs will take about a week. There is no word yet if that power substation issue has any impacts on the nearby Citgo Lake Charles or P66 Westlake refineries.

Two tanker ships collided and caught fire off the coast of Singapore this morning. One ship was a VLCC which is the largest tanker in the world capable of carrying around 2 million barrels. The other was a smaller ship carrying “only” 300,000 barrels (roughly 12 million gallons) of naphtha. The area is known for vessels in the “dark fleet” swapping products offshore to avoid sanctions, so a collision isn’t too surprising as the vessels regularly come alongside one another, and this shouldn’t disrupt other ships from transiting the area.

That’s (not) a surprise: European auditors have determined the bloc’s green hydrogen goals are unattainable despite billions of dollars of investment, and are based on “political will” rather than analysis. Also (not) surprising, the ambitious plans to build a “next-gen” hydrogen-powered refinery near Tulsa have been delayed.

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

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Market TalkThursday, Jul 18 2024

Refined Products Stanch Bleeding Despite Inventory Builds And Demand Slump

Refined products are trading slightly lower to start Thursday after they stopped the bleeding in Wednesday’s session, bouncing more than 2 cents on the day for both RBOB and ULSD, despite healthy inventory builds reported by the DOE along with a large slump in gasoline demand.

Refinery runs are still above average across the board but were pulled in PADD 3 due to the short-term impacts of Beryl. The Gulf Coast region is still outpacing the previous two years and sitting at the top end of its 5-year range as refiners in the region play an interesting game of chicken with margins, betting that someone else’s facility will end up being forced to cut rates before theirs.

Speaking of which, Exxon Joliet was reportedly still offline for a 3rd straight day following weekend thunderstorms that disrupted power to the area. Chicago RBOB basis jumped by another dime during Wednesday’s session as a result of that downtime. Still, that move is fairly pedestrian (so far) in comparison to some of the wild swings we’ve come to expect from the Windy City. IIR via Reuters reports that the facility will be offline for a week.

LA CARBOB differentials are moving in the opposite direction meanwhile as some unlucky seller(s) appear to be stuck long and wrong as gasoline stocks in PADD 5 reach their highest level since February, and held above the 5-year seasonal range for a 4th consecutive week. The 30-cent discount to August RBOB marks the biggest discount to futures since 2022.

The EIA Wednesday also highlighted its forecast for rapid growth in “Other” biofuels production like SAF and Renewable Naptha and Propane, as those producers capable of making SAF instead of RD can add an additional $.75/gallon of federal credits when the Clean Fuels Producer’s Credit takes hold next year. The agency doesn’t break out the products between the various “Other” renewable fuels, but the total projected output of 50 mb/day would amount to roughly 2% of total Jet Fuel production if it was all turned to SAF, which of course it won’t as the other products come along for the ride similar to traditional refining processes.

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

Pivotal Week For Price Action
Market TalkWednesday, Jul 17 2024

Week 28 - US DOE Inventory Recap