Impacts To Fuel Supply Network Are Significant But Largely Contained 

Market TalkWednesday, Sep 1 2021
Pivotal Week For Price Action

A month known for volatility is off to a quiet start for energy and equity markets. While damage assessments are still in the early stages, the price action in futures and cash markets continues to suggest that the impacts to the fuel supply network are significant but largely contained. 

Don’t adjust your dials: The winter-spec October RBOB contract took over the prompt position for futures today, some 14 cents below where the summer-spec September contract left off. If your local market hadn’t already transitioned to September pipeline cycles last week, you’ll notice a big jump in basis values today that will offset the drop in the futures price until the terminals start to transition to winter grades in 2 weeks. What does that mean? It means your local prices are down only about 40 points on the day so far, not 14 cents.

OPEC and Friends are scheduled to meet today, and reports suggest the cartel will not make any changes to its output plan this time around.  

The API reported a build in gasoline stocks of more than 2.7 million barrels, while crude oil and distillates both had draws of roughly 4 million and 2 million barrels respectively. That report probably explains why RBOB has held modestly in the red overnight, while WTI and ULSD see small gains. The DOE’s version of the weekly statistics is due out at its normal time this morning.  Today’s report may have less influence than normal as the data was collected before nearly all Gulf of Mexico oil production was shut, along with more than 2 million barrels/day of refining capacity. Following most hurricanes that hit the area, we typically see a sharp rebound in production that creates chart stalactites, but it could be a little different this time around as damage to Port Fourchon, which moves roughly 90% of offshore oil, could prevent some of those wells from coming back online as quickly as they would if the oil had a place to go.

A lack of power continues to slow the process of getting refineries and pipelines back online, although progress is being made on all fronts. The Plantation pipeline remains shut near its origin but they did announce a plan to attempt a restart later today, which should ease concerns about the product shortages spreading to more states along the East Coast. The port of Pascagoula is also reported to be back in operation with restrictions today, which should help get some product moving to Florida.

Transportation challenges are more painful than ever during this event as the long hauls that save the day in many supply disruptions simply aren’t an option in most cases due to a lack of drivers. It’s also showing up as a challenge with some terminals in the area running out of ethanol, which prevents them from selling the gasoline they have on hand. 

As Ida now targets the East Coast with flooding rains, Tropical Storm Larry has formed off the coast of Africa. This storm is predicted to become a major hurricane over the next week, but just like his predecessors Julian and Kate, he’s predicted to stay far out to sea and not pose a threat to the US.

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

Market Update 9.1.21

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Pivotal Week For Price Action
Market TalkMonday, Oct 2 2023

Gasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading

Gasoline futures are leading the energy complex higher this morning with 1.5% gains so far in pre-market trading. Heating oil futures are following close behind, exchanging hands 4.5 cents higher than Friday’s settlement (↑1.3%) while American and European crude oil futures trade modestly higher in sympathy.

The world’s largest oil cartel is scheduled to meet this Wednesday but is unlikely they will alter their supply cuts regimen. The months-long rally in oil prices, however, has some thinking Saudi Arabia might being to ease their incremental, voluntary supply cuts.

Tropical storm Rina has dissolved over the weekend, leaving the relatively tenured Philippe the sole point of focus in the Atlantic storm basin. While he is expected to strengthen into a hurricane by the end of this week, most projections keep Philippe out to sea, with a non-zero percent chance he makes landfall in Nova Scotia or Maine.

Unsurprisingly the CFTC reported a 6.8% increase in money manager net positions in WTI futures last week as speculative bettors piled on their bullish bets. While $100 oil is being shoutedfromeveryrooftop, we’ve yet to see that conviction on the charts: open interest on WTI futures is far below that of the last ~7 years.

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

Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures

The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.

The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.

We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.

The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.

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

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day

The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.

There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.

As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.

Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.