Political Posturing Has Short-Lived Impact On Prices

Market TalkThursday, Aug 12 2021
Pivotal Week For Price Action

The rollercoaster action in energy futures continues this week as some political posturing proved to have a short-lived impact on prices, and the weekly fundamental data offered a mixed bag to traders. 

RBOB gasoline continues to be the most volatile contract, bouncing 9 cents off of its lows Wednesday, only to drop nearly 3 cents again overnight. That bounce was significant for short term charts as it broke the lower highs pattern we’d seen so far in August, and creates a more neutral outlook near term, although longer term charts continue to suggest there’s more selling to come by fall.

The big rebound in prices Wednesday came after the White House appeared to walk back their earlier comments about OPEC output, saying the statements issued were “not meant to be for immediate response”. The WH Press secretary did not answer a follow up question asking them to explain how asking OPEC to pump more oil squared with their climate change agenda.   

In addition, the letter sent to the FTC “encouraging them to consider” making sure the rules they already have in place are being followed because gasoline and crude oil prices haven’t been moving together lately, looks a little silly considering that the Department of Energy has published multiple reports just this week explaining why gasoline spreads & prices have reached multi-year highs

The DOE’s weekly report was lacking in big numbers, with only small changes in inventory levels.  Refinery runs did tick up in 4 out of 5 PADDs, in what could be the summer production peak before fall maintenance (or hurricane season) starts to reduce run rates.  Gasoline demand estimates were down 3.5% on the week, but a tick higher in exports kept inventories from building.  

Tropical Storm Fred lost strength crossing the mountains of Hispaniola yesterday, and forecasts suggest it will struggle to reach 60mph winds before making landfall on the Florida panhandle early next week. The lack of strength and path well east of the oil production and refining areas should make this a relative nonevent for fuel supply. Don’t relax just yet however, as there’s already another system coming in Fred’s wake given a 60% chance of being named next week, and with this year forecasted to be busy, it seems like just a matter of time before one of these storms heads for refinery row.

Today’s interesting read: How Chevron & Exxon are working to co-process renewable diesel and SAF through their existing refining systems, a method that could dramatically speed up and reduce costs of producing those bio-based fuels, and perhaps further challenge the feedstock market if the technology is proven and approved.

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

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Market TalkFriday, Jul 19 2024

Summertime-Friday-Apathy Trade Influencing Energy Markets

Energy markets are treading water to start the day as the Summertime-Friday-Apathy trade seems to be influencing markets around the world in the early going. RBOB futures are trying for a 3rd straight day of gains to wipe out the losses we saw to start the week, while ULSD futures continue to look like the weak link, trading lower for a 2nd day and down nearly 3 cents for the week.

Bad to worse: Exxon’s Joliet refinery remains offline with reports that repairs may take through the end of the month. On top of that long delay in restoring power to the facility, ENT reported this morning that the facility has leaked hydrogen fluoride acid gas, which is a dangerous and controversial chemical used in alkylation units. Chicago basis values continue to rally because of the extended downtime, with RBOB differentials approaching a 50-cent premium to futures, which sets wholesale prices just below the $3 mark, while ULSD has gone from the weakest in the country a month ago to the strongest today. In a sign of how soft the diesel market is over most of the US, however, the premium commanded in a distressed market is still only 2 cents above prompt futures.

The 135mb Calcasieu Refinery near Lake Charles LA has been taken offline this morning after a nearby power substation went out, and early reports suggest repairs will take about a week. There is no word yet if that power substation issue has any impacts on the nearby Citgo Lake Charles or P66 Westlake refineries.

Two tanker ships collided and caught fire off the coast of Singapore this morning. One ship was a VLCC which is the largest tanker in the world capable of carrying around 2 million barrels. The other was a smaller ship carrying “only” 300,000 barrels (roughly 12 million gallons) of naphtha. The area is known for vessels in the “dark fleet” swapping products offshore to avoid sanctions, so a collision isn’t too surprising as the vessels regularly come alongside one another, and this shouldn’t disrupt other ships from transiting the area.

That’s (not) a surprise: European auditors have determined the bloc’s green hydrogen goals are unattainable despite billions of dollars of investment, and are based on “political will” rather than analysis. Also (not) surprising, the ambitious plans to build a “next-gen” hydrogen-powered refinery near Tulsa have been delayed.

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

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Market TalkThursday, Jul 18 2024

Refined Products Stanch Bleeding Despite Inventory Builds And Demand Slump

Refined products are trading slightly lower to start Thursday after they stopped the bleeding in Wednesday’s session, bouncing more than 2 cents on the day for both RBOB and ULSD, despite healthy inventory builds reported by the DOE along with a large slump in gasoline demand.

Refinery runs are still above average across the board but were pulled in PADD 3 due to the short-term impacts of Beryl. The Gulf Coast region is still outpacing the previous two years and sitting at the top end of its 5-year range as refiners in the region play an interesting game of chicken with margins, betting that someone else’s facility will end up being forced to cut rates before theirs.

Speaking of which, Exxon Joliet was reportedly still offline for a 3rd straight day following weekend thunderstorms that disrupted power to the area. Chicago RBOB basis jumped by another dime during Wednesday’s session as a result of that downtime. Still, that move is fairly pedestrian (so far) in comparison to some of the wild swings we’ve come to expect from the Windy City. IIR via Reuters reports that the facility will be offline for a week.

LA CARBOB differentials are moving in the opposite direction meanwhile as some unlucky seller(s) appear to be stuck long and wrong as gasoline stocks in PADD 5 reach their highest level since February, and held above the 5-year seasonal range for a 4th consecutive week. The 30-cent discount to August RBOB marks the biggest discount to futures since 2022.

The EIA Wednesday also highlighted its forecast for rapid growth in “Other” biofuels production like SAF and Renewable Naptha and Propane, as those producers capable of making SAF instead of RD can add an additional $.75/gallon of federal credits when the Clean Fuels Producer’s Credit takes hold next year. The agency doesn’t break out the products between the various “Other” renewable fuels, but the total projected output of 50 mb/day would amount to roughly 2% of total Jet Fuel production if it was all turned to SAF, which of course it won’t as the other products come along for the ride similar to traditional refining processes.

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

Pivotal Week For Price Action
Market TalkWednesday, Jul 17 2024

Week 28 - US DOE Inventory Recap