Petroleum Prices Move Higher Following Inventory Declines
Petroleum prices are on the move higher again following more inventory declines. Diesel prices continue to hover near 3 year highs as we approach peak demand season for distillates, while gasoline prices are lagging behind as the fall RVP transition is almost behind us and the driving season comes to an end.
The API reported a large draw of 6.1 million barrels for crude oil inventories last week, while distillates declined by 2.7 million barrels and gasoline decreased by 432,000 barrels. The DOE’s version of the inventory report is due out at its normal time this morning, and the lingering impacts from Hurricane Ida are still expected to play a big role in those numbers.
Shell announced that damage from Ida will take until early 2022 to fix, and damage to both offshore wells and pipelines is likely to keep more than 200,000 barrels/day of oil production offline through the end of the year. Put it another way, the damage to Shell’s facilities will reduce oil inventories by 1.5 million barrels every week for the next 3.5 months unless an alternate source can replace those barrels.
Meanwhile, the company’s Norco refinery is still closed due to storm damage and it’s unclear how long those repairs may take. It’s a similar story for the P66 refinery in Belle Chasse LA, that is up for sale, and may need more than 6 months to make repairs after the facility flooded.
Those racing to restore operations after Ida can breathe a little easier this morning as Peter & Rose appear to be non-issues, while the storm that will probably be named Sam later this week has a good chance of following those two storms out towards the open sea and not threatening the US coast line. There are still low odds that storm could get into the Gulf of Mexico so we’ll need to keep an eye on it for a while longer.
RIN prices continued their downward slide Tuesday, with both D4 and D6 values reaching fresh 7 month lows. Still no word on when the EPA will actually announce the blending targets for 2021 (which were due almost a year ago) or for 2022. The EPA did announce Friday that it would be auditing RIN transactions to make sure that fraudulent RINs weren’t still making it through their system.
The EIA this morning reported that energy exports reduced the US trade deficit for the first time ever in 2020, proving once again the expanding role of Gulf Coast refiners in supplying the world’s demand for both fuel, plastics, and other petroleum-based products.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllGasoline 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.