It’s A Mixed Bag For Energy Futures So Far This Morning
It’s a mixed bag for energy futures so far this morning. American diesel and crude oil benchmarks are trading higher to start the day while gasoline futures seek to extend yesterday’s heavy selling. The prompt month RBOB contract, the main driver of national gasoline prices, has dropped over 25 cents from Monday and over a dollar since setting highs back in June.
Rumors of a very hot Consumer Price Index headline figure circulated news outlets yesterday afternoon. If confirmed to be correct, the CPI, used as a measure for how much general goods and services cost to the average consumer, has risen another 1.1% in June, bumping the annual inflation rate to 8.8%. The Bureau of Labor Statistics is set to release their report at 8:30 Eastern, and we’ll find out of the leaked figured were in fact fake.
The Energy Information Administration published an article today highlighting the continuation of lofty RIN prices last month. The EIA mentions it’s the increase in blend stock prices that is driving the credit prices higher, as a part of a story we are not unfamiliar with. It looks like it might be a different case this month as we see edible oils, wheat, and corn prices plummet as countries shift policies/strategies to cope with the shortages caused by the war in Ukraine.
Well the rumored CPI numbers ended up being fabricated, but the lie seems much more palatable than the truth. Inflation costs for consumers raised by 1.3% last month, compared to the 1.1% “estimated” yesterday, solidifying the annual inflation rate as the highest its been in 41 years. It won’t come as a surprise to anyone that commutes: the increase in the cost of gasoline was the largest month-over-month percentage point increase.
Click here to download a PDF of today's TACenergy Market Talk.
From the Bureau of Labor Statistics
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Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.
After Another Black Friday Selloff Pushed Energy Futures Sharply Lower In Last Week’s Holiday-Shortened Trading
After another Black Friday selloff pushed energy futures sharply lower in last week’s Holiday-shortened trading, we’re seeing a modest bounce this morning. Since spot markets weren’t assessed Thursday or Friday, the net change for prices since Wednesday’s settlement is still down more than 6-cents for gasoline and almost 5-cents for diesel at the moment.
OPEC members are rumored to be nearing a compromise agreement that would allow African producers a higher output quota. Disagreement over that plan was blamed on the cartel delaying its meeting by 4-days last week which contributed to the heavy selling. The bigger problem may come from Russia, who announced plans last week to increase its oil output once its voluntary cut agreement ends now that price cap mechanisms are proving to be ineffective.
While an uneasy truce in Gaza held over the weekend, tensions on the Red Sea continued to escalate with the US Navy intervening to stop another hijacking and being rewarded for its efforts by having missiles fired at one of its ships.
RIN values came under heavy selling pressure Wednesday afternoon following a court overturning the EPA’s ruling to deny small refinery hardship waivers to the RFS. Those exemptions were a big reason we saw RINs drop sharply under the previous administration, and RINs were already on due to the rapid influx of RD supply this year.
More bad news for the food to fuel lobby: the White House is reportedly stalling plans to allow E15 blending year-round after conflicting studies about ethanol’s ability to actually lower carbon emissions, and fuel prices. Spot prices for ethanol in Chicago reached a 2.5 year low just ahead of the holiday.
Baker Hughes reported the US oil rig count held steady at 500 active rigs last week, while natural gas rigs increased by 3.
The first of perhaps several refining casualties caused by the rapid increase in new capacity over the past two years was reported last week. Scotland’s only refinery, which has a capacity of 150mb/day is preparing to shutter in 2025.
The CFTC’s commitment of traders report was delayed due to the holiday and will be released this afternoon.
Click here to download a PDF of today's TACenergy Market Talk.