Petroleum Futures Are Set For Their Largest Weekly Gains Since August

Market TalkFriday, Dec 10 2021
Pivotal Week For Price Action

Petroleum futures are set for their largest weekly gains since August, as prices move higher again to start Friday’s session after a modest reversal Thursday slide lower. Assuming there isn’t a major reversal later today, this week’s action would snap a 7 week losing streak for refined products, and move them out of the bear market territory they entered to start the month. 

There is still more work to be done to break the downward sloping trend-lines which should create a pivotal test to end the week. Both RBOB and ULSD are just a penny or two away from breaking those trends that knocked 50-60 cents off of prices since peaking in October, but if they fail to sustain their momentum, there’s a strong case to be made that we could see another wave of selling soon.

Regional markets are already seeing some major moves lower this week despite the rally in futures, particularly in the case of diesel, where tight supplies in the Southwestern US and Ohio Valley are healing quickly as refineries come back online and pipeline schedules get back closer to normal. 

Bye bye Backwardation?  The forward curve charts below show the dramatic flattening of the futures price curves over the past month as the supply crunch has eased across most markets.  Also note that the rally over the past week has been fairly steady over the next 3 years, which is consistent with the move higher in equity markets as Omicron fears are put on the back burner.

RGGI credits jumped to a record high this week, joining a strong rally in several credit markets, only to plummet Thursday after Virginia’s governor signaled his intent to pull the state out of the regional cap & trade program. We also recently saw Connecticut and Massachusetts pull back from the New England Transportation Climate Initiative program, as high energy prices prove to be a powerful political motivator. 

Speaking of which, the Consumer Price Index for November was released this morning, and the annual inflation index reached its highest annual level in nearly 40 years at 6.8%. Energy prices ticked higher immediately following that report, which apparently makes sense since energy price gains account for much of that inflation. The inflation reading excluding food and energy was at 4.9%, which is “only” the highest since 2008.  For those that remember 2008, or 1982, you can see why these inflation figures are troubling to many.    

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

Market Talk Update 12.10.21

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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.

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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.