Petroleum Futures Wipe Out Early Losses

Market TalkThursday, Dec 19 2019
Week 44 - US DOE Inventory Recap

Wednesday’s DOE inventory report was less bearish than Tuesday’s API data, which helped petroleum futures wipe out early losses, and keep the 2019 year-end mini rally alive. That short-lived sell-off relieved some of the technical overbought pressure that had built up after 4 days of gains, and leaves the door open for a test of the September highs.

RBOB gasoline continues to show surprising counter-seasonal strength despite inventories sitting at record highs for this time of year, heading into the weakest 2 months for consumption. At this pace, it looks like there’s a strong chance gasoline inventories will break all-time highs at some point in January.

China announced new tariff exemptions on 6 US petroleum-based products in the latest sign of easing trade tensions. While the announcement is good news for several US refiners, none of the products listed are consumed in engines. Another reminder of both the ongoing transition of the US from the world’s largest importer to its largest exporter of petroleum products, and the fact that petroleum is becoming more and more about plastic production and less about motor fuels.

Today’s interesting read: A recap of the anticipated impacts of the IMO diesel spec change, which could impact 90% of global trade in some form or fashion. As the article concludes, “…For the whole world to change specification of a product on the same day is almost unheard of.”

While the Ag community got a big shot in the arm this week with the expected inclusion of the $1/gallon biodiesel blenders credit in the congressional spending package, there was a bit of bad news Wednesday when the White House indicated the Renewable Volume Obligation for 2020 would not change from the preliminary proposal. While this does mean an increase in the amount of biofuels mandated to be blended in the US, the Ag lobby seems to have lost this round of the small-refinery exemption debate. Ethanol RINs continued to languish following the news while Biodiesel RINs managed to bounce off of Tuesday’s lows.

Right on Cue, the EIA this morning published a look at Biodiesel production in the US. While it’s no surprise that the Midwest leads the nation in biodiesel production capacity it’s worth noting that Texas is the 2nd largest producing state, which provides a bit of conflict in the ongoing lobbying battles between Big Ag and Big Oil.

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

Petroleum Futures Wipe Out Early Losses gallery 0

News & Views

View All
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.