Gasoline Futures Are Leading The Energy Complex Higher This Morning

Market TalkTuesday, Oct 26 2021
Pivotal Week For Price Action

Gasoline futures are leading the energy complex higher this morning, setting yet another 7 year high, even after the rally in oil contracts stalled out Monday. Weather disruptions on the East and West Coasts seem to be a major factor contributing to the strength in RBOB as time spreads continue to surge with only a few days left before the October contract expires.

The Bomb Cyclone that hit the West Coast over the weekend disrupted operations at 3 different refineries in Northern California, sending basis values for San Francisco spots sharply higher on the day and outright prices to all-time highs in some cases.

So far there have not been any reports of upsets at the remaining East Coast refineries, but heavy flooding has been reported in the area, so some disruption to the supply network is still possible. Even if the refineries continue operating, this Nor’easter will definitely disrupt vessel traffic in and around the New York harbor at a time when supplies are unusually tight.  At least one terminal in the area was shut due to power outages, and from the forecasts, it’s probably not going to be the last one to have a temporary disruption as the storm passes.  Lines space values for gasoline shipped on Colonial remain in positive territory, which has been an extremely rare occurrence over the past two years, another sign of the tightness in prompt supplies.

Countries around the world are announcing their climate plans this week, ahead of the global summit in Scotland this weekend. One of the biggest questions heading into the summit is whether or not China (the country with the most pollution) will attend. Overnight reports suggest that the country’s president will not join the summit, which is a major blow to the credibility of any pact reached.

The other big headline today is that Tesla has surpassed $1 Trillion in market cap, and its founder is now worth more than Exxon. Meanwhile, even ambitious projections for electric car production puts them at less than 5% of the global vehicle count 10 years from now. Exxon meanwhile continues to pursue its own carbon reduction agenda through its carbon capture and sequestration (CCS) projects.

The Dallas Fed’s Texas manufacturing survey showed that growth in the state remains above average even as costs are rising (aka inflation), and raw material shortages are limiting output. A highlighted note from chemical manufacturers shows that some are unable to keep up with demand, as we’ve seen with a shortage of additives across several markets in the past month.

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Market Talk Update 10.26.21

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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