Oil And Gasoline Contracts Reached Fresh Highs

Market TalkWednesday, Mar 20 2019
Spring Breakout Rally Recovering From Hangover

Spring Break has been put on hold for energy futures as the upward momentum seems to have stalled out after oil and gasoline contracts reached fresh highs for the year. Don’t get too excited about the sell-off just yet, we’ve seen a few of these head-fakes already during the most recent run-up, and March Madness is just about to tip off.

Concerns over US/China trade talks – the easy mark for any headline writer in 2019 – are getting credit for the pullback even though US equity markets are holding steady. Others suggest that the postponed OPEC meeting is a sign that Russia is pressuring the cartel to end its output agreement earlier than the Saudi’s would like, and that strain could be bearish for prices.

The API was reported to show inventory declines across the board last week, with crude stocks down 2.1 million barrels, gasoline down 2.8 and diesel down 1.6. The EIA’s weekly report is due out at its normal release time of 9:30 central this morning. Look for product draws in the Midwest (PADD 2) in today’s report as signs in local pipeline markets suggest supplies have drawn down rapidly in the past week.

RIN values continue to drop this week after the EPA’s proposal to limit trading in the renewable fuel credits, and to approve a handful of small-refinery waivers. Ethanol values meanwhile have surged as logistical constraints have created gasoline supply disruptions in a handful of markets across the country, forcing buyers to pay up to find replacement barrels. Overall US ethanol inventories remain near all-time highs so it seems this price spike will be short lived once the trains get back on schedule.

The fire at the Deer Park TX terminal has been extinguished after burning for nearly 4 days. While that situation looks like it may have only minor impacts on operations and prices in the world’s busiest petroleum hub, it could have longer term consequences for the state’s environmental watchdog as the extended duration created plenty of doubts about their assurances about air quality.

Speaking of which, Carbon emissions continue to move into the forefront of our industry’s and society’s consciousness, with numerous plans for reduced emissions mentioned during recent earnings calls and during the CERAWeek conference. The EIA this morning showed its predictions that US energy-related carbon emissions will hold steady through 2050 as natural gas replaces coal to support America’s growth. Petroleum-based emissions are expected to fall over the next decade owing to increased vehicle fuel efficiency and more stringent product specs.

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Pivotal Week For Price Action
Market TalkMonday, Oct 2 2023

Gasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading

Gasoline futures are leading the energy complex higher this morning with 1.5% gains so far in pre-market trading. Heating oil futures are following close behind, exchanging hands 4.5 cents higher than Friday’s settlement (↑1.3%) while American and European crude oil futures trade modestly higher in sympathy.

The world’s largest oil cartel is scheduled to meet this Wednesday but is unlikely they will alter their supply cuts regimen. The months-long rally in oil prices, however, has some thinking Saudi Arabia might being to ease their incremental, voluntary supply cuts.

Tropical storm Rina has dissolved over the weekend, leaving the relatively tenured Philippe the sole point of focus in the Atlantic storm basin. While he is expected to strengthen into a hurricane by the end of this week, most projections keep Philippe out to sea, with a non-zero percent chance he makes landfall in Nova Scotia or Maine.

Unsurprisingly the CFTC reported a 6.8% increase in money manager net positions in WTI futures last week as speculative bettors piled on their bullish bets. While $100 oil is being shoutedfromeveryrooftop, we’ve yet to see that conviction on the charts: open interest on WTI futures is far below that of the last ~7 years.

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

Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures

The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.

The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.

We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.

The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.

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

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day

The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.

There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.

As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.

Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.