Oil And Diesel Prices Trading At Multi-Year Highs
Oil and diesel prices are trading at multi-year highs as June trading gets underway, with the charts favoring additional upside if this early rally can hold. Gasoline prices are also rallying, but are still two cents below their highs for the year. There’s not much fundamental news to pin the 3% rally on this morning. Equities are pointing higher and the dollar is pointing lower, both of which can encourage the energy bulls, and of course there are the usual suspects of demand optimism, shrinking global inventories and a lack of a deal with Iran that can take blame for any rally.
Money managers added to their long bets in WTI and ULSD last week, while cutting back on RBOB and Brent positions. A large round of short covering pushed ULSD’s net length to its highest level in 2.5 years, but unlike recent weeks, its European counterpart Gasoil did not increase in tandem.
Baker Hughes reported a net increase of three oil rigs working in the U.S. last week, two of which were in the Permian basin. That brings the Permian and Total U.S. counts to fresh one year highs, but the totals are still just over half of what they were prior to the pandemic, even as oil prices are approaching three year highs.
ExxonMobil’s pipeline company reported a gasoline leak in Harris County over the weekend and shut the line as investigations and repairs get underway. It’s not yet clear which if the company’s numerous pipeline segments in the area is impacted by that shutdown, and what terminal(s) may feel a supply crunch as a result, but there’s a good chance since it was gasoline that spilled it was the line running to DFW that is offline.
Today’s Interesting read from the WSJ: Why the Californication of fuel programs will make $5 gasoline a reality.
The IEA published a look this morning at the types and sources of biofuels that will help achieve a net zero by 2050 scenario, with organic waste streams expected to take the largest piece of the supply chain, followed by short rotation woody crops.
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.