Energy Prices Stumbling To Start Friday’s Session

Energy prices are stumbling to start Friday’s session, pulling back from the six week highs set Thursday, in what looks like a round of profit taking after a strong rally this week. Reports that Eurozone economies are now in a double-dip recession are taking some of the blame for the early wave of selling, even as signs continue to suggest that the U.S. recovery is picking up steam. Unless prices drop another nickel from current levels, there’s still a technical argument that we should see the 2021 highs tested in the coming weeks.

As the forward curve charts below show, the run up in prices over the past week has been fairly steady across the next 36 months, suggesting the move isn’t related to any near-term supply situations, but perhaps broader expectations for demand recovery. 

There’s been a theme in Q1 earnings reports this week: major oil producers are largely surpassing expectations as prices have recovered, while oil refiners are still struggling as rising RIN prices offset improving crack spreads, although most refiners are now seeing large non-cash income gains as their inventory valuations increase with rising prices, offsetting the record write downs we saw a year ago when prices collapsed. RIN prices continued to trade near all-time highs Thursday, but the upward momentum slowed as the big rally in grain prices seems to be taking a breather.

There have been numerous articles written this week about 13 refineries that exceeded their EPA limits for Benzene pollution in 2020 (despite most plants running well below capacity) but so far it doesn’t appear those emissions will cause the plants to reduce runs. The Suncor refinery outside of Denver meanwhile is facing public challenges this week on the renewal of the 80-year old facilities air permits, which could threaten the state’s last refinery. 

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