Gasoline Prices Are Leading The Modest Move Lower This Morning

Market TalkWednesday, Dec 22 2021
Pivotal Week For Price Action

After a strong Tuesday rally, energy and equity markets are slipping back into the red in the early going Wednesday as traders begin to wind down their activity ahead of the Christmas break.

RBOB and ULSD futures are hovering right around the weekly trend lines that have been in place since they peaked out in October some 40 cents above current values. If they can break through that resistance, there’s clear sailing on the charts for at least another 10 cent rally, and a decent chance we could see 20 cents added in the next few weeks, even as seasonal factors would tend to lean the other direction. If those trend lines continue to act as repellant to these rally attempts however, it seems inevitable that we’ll see prices make another run at the November lows.

Gasoline prices are leading the modest move lower this morning, with another large inventory build seeming to weigh on RBOB futures. The API reported that gasoline stocks grew by 3.7 million barrels last week, while crude and diesel inventories saw declines. Large builds are what we expect to see in gasoline this time of year, and we typically continue to see them until winter inventories peak some time in February ahead of the spring drawdown. Last weeks’ DOE report broke the mold and showed a large decline in gasoline stocks amidst a record surge in demand that seemed a little too good to be true, which could mean today’s report has a large correction and puts more downward pressure on prices.

Speaking of downward pressure: Ethanol prices along the East Coast have finally started to pull back from the $4 level, dropping 65 cents in the past week, and closing the gap with prices in other parts of the country that started their return to reality about a month ago. It’s not a shortage of ethanol that’s causing the price spikes, but a shortage of transportation to get the ethanol from the middle of the country where it’s made, to the coasts where it’s consumed, and as gasoline demand has started the annual winter decline, those bottlenecks appear to be easing, and the forward curve chart suggests there’s another dollar/gallon left to come out of these prices before the correction is done.    

The next front in the cold war?  While Russia continues its sabre rattling campaign over the Ukraine, the soviets are also seeing recognition of their new carbon program by the EU. No word yet if the EU refuses whether or not the Russians will simply invade the EU’s carbon scheme.

A Dallas FED report Tuesday highlighted the big strides in battery technology over the past 30 years, while noting the improvements still needed if EVs are going to move from 2% of US vehicle sales to anything resembling the 17% target the EPA just set for 2026

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

Market Talk Update 12.22.21

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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.

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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.