News Of Oil Tanker Seized By Iranian Forces 

Market TalkWednesday, Aug 4 2021
Pivotal Week For Price Action

Energy prices are coming under pressure for a 3rd straight day, although so far the theme of the sell-off has been bend, don’t break. News that an oil tanker had been seized by Iranian forces near the world’s most strategic waterway, had buyers step in Tuesday morning after an early wave of selling had the energy complex looking poised for a big drop. Reports this morning that the tanker had been released seems to have calmed fears of an immediate escalation that could disrupt supplies and has WTI trading back below $70. 

Daily and weekly charts continue to suggest that prices have likely topped out after a 9 month rally, and the July lows of $2.07 for RBOB and $1.96 for ULSD look like the near term target to the downside.  

The API reported inventory draws across the board last week, but even a decline of nearly 6 million barrels of gasoline wasn’t able to help prices sustain an overnight rally attempt. Oil stocks were said to decline by 879k barrels, while diesel was down 717k on the week.  The EIA’s weekly stats should be out at 9:30 central.

Coffeyville Resources announced it was pausing its Renewable Diesel production at its Wynnewood, OK refinery due to high feedstock costs as oil refiners compete for other types of oil to take advantage of California’s credit programs and also help the environment. As the chart below shows, soybean oil prices have tripled in the past year as the race to make more renewables has refiners competing with food producers as the truly alternative feedstock sources like waste oils are depleted.

Marathon reported an operating profit for the first time since the pandemic hit. A few notes from their Q2 earnings release are included below.

Insult to injury: For those in the US struggling to maintain adequate supplies of jet fuel, the EIA this morning reminds you that inventories of Jet are above average across the country as refiners have rapidly ramped up production in recent months. It’s no surprise that refiners will gladly return Jet output after being forced to shift to other distillates last year when Jet demand collapses, as aviation fuels don’t create a RIN obligation, and save those producers somewhere around $.20/gallon as result. The shortage of drivers to get fuel from terminal storage to the end user tankage continues to be the bottleneck in the supply chain however, with more airports forced to ration their supplies as a result.

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Market Update 8.4.21

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Market TalkFriday, Jul 19 2024

Summertime-Friday-Apathy Trade Influencing Energy Markets

Energy markets are treading water to start the day as the Summertime-Friday-Apathy trade seems to be influencing markets around the world in the early going. RBOB futures are trying for a 3rd straight day of gains to wipe out the losses we saw to start the week, while ULSD futures continue to look like the weak link, trading lower for a 2nd day and down nearly 3 cents for the week.

Bad to worse: Exxon’s Joliet refinery remains offline with reports that repairs may take through the end of the month. On top of that long delay in restoring power to the facility, ENT reported this morning that the facility has leaked hydrogen fluoride acid gas, which is a dangerous and controversial chemical used in alkylation units. Chicago basis values continue to rally because of the extended downtime, with RBOB differentials approaching a 50-cent premium to futures, which sets wholesale prices just below the $3 mark, while ULSD has gone from the weakest in the country a month ago to the strongest today. In a sign of how soft the diesel market is over most of the US, however, the premium commanded in a distressed market is still only 2 cents above prompt futures.

The 135mb Calcasieu Refinery near Lake Charles LA has been taken offline this morning after a nearby power substation went out, and early reports suggest repairs will take about a week. There is no word yet if that power substation issue has any impacts on the nearby Citgo Lake Charles or P66 Westlake refineries.

Two tanker ships collided and caught fire off the coast of Singapore this morning. One ship was a VLCC which is the largest tanker in the world capable of carrying around 2 million barrels. The other was a smaller ship carrying “only” 300,000 barrels (roughly 12 million gallons) of naphtha. The area is known for vessels in the “dark fleet” swapping products offshore to avoid sanctions, so a collision isn’t too surprising as the vessels regularly come alongside one another, and this shouldn’t disrupt other ships from transiting the area.

That’s (not) a surprise: European auditors have determined the bloc’s green hydrogen goals are unattainable despite billions of dollars of investment, and are based on “political will” rather than analysis. Also (not) surprising, the ambitious plans to build a “next-gen” hydrogen-powered refinery near Tulsa have been delayed.

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

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Market TalkThursday, Jul 18 2024

Refined Products Stanch Bleeding Despite Inventory Builds And Demand Slump

Refined products are trading slightly lower to start Thursday after they stopped the bleeding in Wednesday’s session, bouncing more than 2 cents on the day for both RBOB and ULSD, despite healthy inventory builds reported by the DOE along with a large slump in gasoline demand.

Refinery runs are still above average across the board but were pulled in PADD 3 due to the short-term impacts of Beryl. The Gulf Coast region is still outpacing the previous two years and sitting at the top end of its 5-year range as refiners in the region play an interesting game of chicken with margins, betting that someone else’s facility will end up being forced to cut rates before theirs.

Speaking of which, Exxon Joliet was reportedly still offline for a 3rd straight day following weekend thunderstorms that disrupted power to the area. Chicago RBOB basis jumped by another dime during Wednesday’s session as a result of that downtime. Still, that move is fairly pedestrian (so far) in comparison to some of the wild swings we’ve come to expect from the Windy City. IIR via Reuters reports that the facility will be offline for a week.

LA CARBOB differentials are moving in the opposite direction meanwhile as some unlucky seller(s) appear to be stuck long and wrong as gasoline stocks in PADD 5 reach their highest level since February, and held above the 5-year seasonal range for a 4th consecutive week. The 30-cent discount to August RBOB marks the biggest discount to futures since 2022.

The EIA Wednesday also highlighted its forecast for rapid growth in “Other” biofuels production like SAF and Renewable Naptha and Propane, as those producers capable of making SAF instead of RD can add an additional $.75/gallon of federal credits when the Clean Fuels Producer’s Credit takes hold next year. The agency doesn’t break out the products between the various “Other” renewable fuels, but the total projected output of 50 mb/day would amount to roughly 2% of total Jet Fuel production if it was all turned to SAF, which of course it won’t as the other products come along for the ride similar to traditional refining processes.

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

Pivotal Week For Price Action
Market TalkWednesday, Jul 17 2024

Week 28 - US DOE Inventory Recap