Oil Prices Settle At Their Highest Levels
Oil prices settled at their highest levels in five months Wednesday, but remain well below the intraday highs set earlier in the month, and seem hesitant to make a push to break out of their sideways trading ranges as monthly reports from OPEC and the IEA paint a bleak picture for consumption.
The IEA’s monthly oil market update reduced its global oil demand estimates for 2020 and 2021, the first decrease in several months, primarily driven by weakness in the aviation sector. Global oil output is growing once again as the U.S., Canada and Saudi Arabia lead the recovery in production. The report also predicts that refinery intake will lag the global demand recovery as inventory gluts limit their operational capacity.
The DOE’s weekly report was much more bullish than the monthly forecasts released this week, with U.S. petroleum consumption and refinery runs both recovering to their highest levels in the past five months, driving inventory draws across the board. In most years, we would expect to see gasoline demand and refinery runs peak for the season around this time, which will make the next few weekly reports particularly noteworthy to see if typical seasonality holds true in this most unusual of years. The report also showed the largest drop in U.S. refining capacity in over eight years, and more reductions are expected, as this data seems to only just now be reflecting the shuttering of the PES facility.
Yesterday we guessed that the partnership announced to convert a refinery in Bakersfield, California to produce renewable diesel would likely not be the last such plan announced. Sure enough, later in the day, P66 announced its plan to convert its San Francisco (Rodeo) refinery to a renewable facility. In just the past few months, we’ve seen fossil to renewable refinery announcements from Holly (Cheyenne, WY), Marathon (Martinez, CA and Dickinson, ND) Global Clean Energy (Bakersfield, CA) and now P66 (Rodeo, CA). This is in addition to numerous other Renewable production projects that were slated to come online in the next two years.
The announced shutdowns of several refineries seems to be contributing to a selloff in RIN values, with D6 values dropping a dime in the past 10 days. The EPA continues to be quiet on the RFS targets for 2021, and on the rumors swirling about plans for small refinery waivers.
Tropical Storm Josephine is expected to be named later today according to the NHC. While this will set yet another record for the pace of storms in a season, this system looks like it will stay out to sea and not threaten the U.S. coast.
Click here to download a PDF of today's TACenergy Market Talk.
Latest Posts
Gasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading
The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
Week 39 - US DOE Inventory Recap
Social Media
News & Views
View All
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.
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.
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.