Memorial Day Gasoline And Diesel Prices Down From Last Years Record Setting Levels
Energy prices are ticking modestly higher after a big Thursday sell-off wiped out most of the gains made earlier in the week as a pair of disagreements continues to keep traders guessing.
Drivers heading out for Memorial Day weekend are enjoying retail gasoline prices that are more than $1.20/gallon less than last year’s record setting levels on average, thanks to the world’s supply network adjusting to the Russian supply shock. The year-on-year price drop is even more dramatic for diesel prices that are down $1.65/gallon on average, thanks to the “freight recession” pushing demand sharply lower.
Deal or no deal? The political theatre continues in Washington with both sides preparing to declare victory in the debt debate, while dragging out the negotiations to the last minute in an effort to boost ratings.
Saudi Arabia and Russia are sending mixed messages on oil production quotas a week before the next OPEC & Friends meeting. This isn’t exactly new as Russia has been violating its official quotas for some time (which isn’t too surprising considering these are the same people that invaded Ukraine twice in the past decade) but the big question is whether or not the Saudi’s decide to teach them a lesson and turn this into another price war as they did in 2014 and 2020.
NOAA predicted a “near normal” hurricane season in the Atlantic this year, with an El Nino pattern developing which will act as a counterbalance to the high-water temps in the Atlantic to some degree. The forecast does warn that conditions for tropical waves forming off of the coast of Africa are favorable, which is where several of the biggest storms of all time have formed. The outlook ends with its annual warning that despite the prediction for less activity this year than we’ve seen the past 3 years, it still only takes 1 storm to cause major disruptions.
Pemex auditors are apparently admitting that the new 340,000 barrel/day refinery that had a grand opening last year was still not ready to produce refined products, and that the most recent target of July 2023 “was not feasible”.
The Dallas FED published a look at the rapid growth at the busiest energy export port in the US this week, and it’s not the one you think it is.
Click here to download a PDF of today's TACenergy Market Talk.
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Energy Prices Up Over 2% Across The Board This Morning
Refined product futures traded in an 8-10 cent range yesterday with prompt heating oil settling up ~6 cents and RBOB ending up about flat. Oil prices clawed back some of the losses taken in the first two full trading days of the week, putting the price per barrel for US crude back over the $70 mark. Prices are up just over 2% across the board this morning, signifying confidence after the Senate passed the bipartisan debt ceiling bill last night.
The EIA reported crude oil inventories up 4.5 million barrels last week, aided by above-average imports, weakened demand, and a sizeable increase to their adjustment factor. The Strategic Petroleum Reserve continues to release weekly through June and the 355 million barrels remaining in the SPR is now at a low not seen since September 1983. Exports increased again on the week and continue to run well above last year’s record-setting levels through the front half of the year. Refinery runs and utilization rates have increased to their highest points this year, both sitting just above year-ago rates.
Diesel stocks continue to hover around the low end of the 5-year range set in 2022, reporting a build of about half of what yesterday’s API data showed. Most PADDs saw modest increases last week but all are sitting far below average levels. Distillate imports show 3 weeks of growth trending along the seasonal average line, while 3.7 million barrels leaving the US last week made it the largest increase in exports for the year. Gasoline inventories reported a small decline on the week, also being affected by the largest jump in exports this year, leaving it under the 5-year range for the 11th consecutive week. Demand for both products dwindled last week; however, gas is still comfortably above average despite the drop.
The sentiment surrounding OPEC+’s upcoming meeting is they’re not likely to extend oil supply cuts, despite prices falling early in the week. OPEC+ is responsible for a significant portion of global crude oil production and its policy decisions can have a major impact on prices. Some members of OPEC+ have voluntarily cut production since April due to a waning economic outlook, but the group is not expected to take further action next week.
Click here to download a PDF of today's TACenergy Market Talk
Prices Are Mixed This Morning As The Potential Halt In U.S. Interest Rate Hikes
Bearish headlines pushed refined products and crude futures down again yesterday. Prompt RBOB closed the month at $2.5599 and HO at $2.2596 with WTI dropping another $1.37 to $68.09 and Brent losing 88 cents. Prices are mixed this morning as the potential halt in U.S. interest rate hikes and the House passing of the US debt ceiling bill balanced the impact of rising inventories and mixed demand signals from China.
The American Petroleum Institute reported crude builds of 5.2 million barrels countering expectations of a draw. Likewise, refined product inventories missed expectations and were also reported to be up last week with gasoline adding 1.891 million barrels and diesel stocks rising 1.849 million barrels. The market briefly attempted a push higher but ultimately settled with losses following the reported supply increases implying weaker than anticipated demand. The EIA will publish its report at 10am this morning.
LyondellBasell announced plans yesterday to delay closing of their Houston refinery, originally scheduled to shut operations by the end of this year, through Q1 2025. The company “remains committed to ceasing operation of its oil refining business” but the 289,000 b/d facility remaining online longer than expected will likely have market watchers adjusting this capacity back into their balance estimates.
Side note: there is still an ongoing war between Russia and Ukraine. Two oil refineries located east of Russia's major oil export terminals were targeted by drone attacks. The Afipsky refinery’s 37,000 b/d crude distillation unit was struck yesterday, igniting a massive fire that was later extinguished while the other facility avoided any damage. The attacks are part of a series of intensified drone strikes on Russian oil pipelines. Refineries in Russia have been frequently targeted by drones since the start of the military operation in Ukraine in February 2022.