Minor Drag Coming From Diesel Contracts Seem To Have Lost Their Luster With Investing Community

Market TalkMonday, Oct 25 2021
Pivotal Week For Price Action

WTI traded north of $85 overnight and RBOB gasoline is above $2.52, both fresh 7 year highs as the petroleum bulls were able to maintain control despite a few rounds of heavy selling last week.  With those new highs set, the charts continue to favor a run towards $90 for crude, with some minor drag coming from diesel contracts that seem to have lost their luster with the investing community.

The most exciting market last week was New York Harbor ethanol that reached a multi-year high north of $3 early in the week, only to drop by 35 cents to end the week as the supply bottleneck seems to have relieved itself to the time being.  RIN markets also had a noticeable pullback on Friday after a strong rally earlier in the week.

Money managers were all over the place with petroleum contracts last week, with large increases in net length held in WTI, RBOB and Gasoil contracts, while ULSD and Brent saw sizeable reductions in the bets on higher prices.  There was a big jump in new short positions held by the large speculative class of trader in both ULSD and Gasoil contracts, while WTI saw a 22% drop in shorts last week.  Those moves by the large funds are correlating to the price action we’re seeing today, with RBOB and WTI both breaking to fresh 7 year highs while ULSD lags behind, needing another 4 cents to catch up to the rest of the complex.

Baker Hughes reported a net decline of 2 oil rigs working in the US last week, snapping a streak of 5 straight weekly increases.   Wyoming accounted for the bulk of the drop, with a net decrease of 3 rigs, while the other states combined to add 1.  A WSJ article Friday highlighted the challenges drillers are having finding employees and equipment (along with pretty much every other industry) which seems to be limiting the number of active oil rigs these days much more than price.  If you need a reminder of why we’re still extremely fortunate despite these tight supply chains, read about the explosion at an illegal Nigerian refinery last week.

While the US is facing a trifecta of severe weather this week with a Bomb Cyclone hitting the West Coast, Tornados threatening much of the south, and a Nor’easter pummeling the East Coast, the tropics remain quiet with just over 5 weeks left in the Atlantic Hurricane season, so any impacts this week are likely to be reduced demand in areas hardest hit, without any major threat to supply infrastructure.

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Market Talk Update 10.25.21

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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.

Pivotal Week For Price Action
Market TalkWednesday, Mar 27 2024

Week 12 - US DOE Inventory Recap

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.