Prices Are Trickling Back Into Their Sideways Pattern
It’s another quietly red start for energy futures as the enthusiasm for some bullish headline numbers in Wednesday’s DOE report starts to wear off and prices are trickling back into their sideways pattern. There is a chance for a technical breakout however, with product prices near the top of their recent range following a strong couple of days, but we’ll need to see RBOB hold above $1.65 and HO above $1.97 before confirming the chance for a substantial move higher.
Although across-the board inventory declines were enough to spur a solid 1-day rally, that enthusiasm may be tempered by a large increase in refinery runs that suggest US plants have made the seasonal turn out of fall maintenance, and production rates should increase for the next 8-10 weeks. That increase in refinery runs was most notable in PADD 5 (West Coast) where rates have gone from below the low end of the 5 year seasonal range, to above the high end in just 3 weeks, which is no doubt to the drop of $1/gallon in CA gasoline prices in October.
Diesel inventories across most of the country remain tight, with the nationwide Days of Supply calculations holding below their 5-year seasonal range for a 2nd straight week. The East Coast looks to have the most concern after PADD 1 stocks dropped for a 5th straight week, which has pushed NYH basis values higher, and sparked a resurgence in activity for space on the Colonial pipeline.
Although total US gasoline inventories have declines for 4 straight weeks, they remain above their 5 year average for this time of year. With refinery runs cranking back up, and the seasonal demand slowdown looming, it’s becoming hard to make a fundamental argument for stronger gasoline prices over the next few months.
The EIA published a look at US product exports this morning, highlighting the continued growth in refined product sales overseas. The product mix is worth noting however as gasoline exports have declined this year, while the bulk of the growth came from sales of propane.
Click here to download a PDF of today's TACenergy Market Talk.
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
Energy Futures Are Drifting Quietly Higher This Morning
Refined Products Holding Close To Break Even While Oil Prices Are Losing Just Under 1%
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
The energy complex is trading modestly lower so far this morning with WTI crude oil futures leading the way, exchanging hands $1.50 per barrel lower (-1.9%) than Tuesday’s settlement price. Gasoline and diesel futures are following suit, dropping .0390 and .0280 per gallon, respectively.
A surprise crude oil build (one that doesn’t include any changes to the SPR) as reported by the American Petroleum Institute late Tuesday is taking credit for the bearish trading seen this morning. The Institute estimated an increase in crude inventories of ~5 million barrels and drop in both refined product stocks of 1.5-2.2 million barrels for the week ending April 26. The Department of Energy’s official report is due out at it’s regular time (9:30 CDT) this morning.
The Senate Budget Committee is scheduled to hold a hearing at 9:00 AM EST this morning regarding a years-long probe into climate change messaging from big oil companies. Following a 3-year investigation, Senate and House Democrats released their final report yesterday alleging major oil companies have internally recognized the impacts of fossil fuels on the climate since as far back as the 1960s, while privately lobbying against climate legislation and publicly presenting a narrative that undermines a connection between the two. Whether this will have a tangible effect on policy or is just the latest announcement in an election-yeardeluge is yet to be seen.
Speaking of deluge, another drone attack was launched against Russian infrastructure earlier this morning, causing an explosion and subsequent fire at Rosneft’s Ryazan refinery. While likely a response to the five killed from Russian missile strikes in Odesa and Kharkiv, Kyiv has yet to officially claim responsibility for the attack that successfully struck state infrastructure just 130 miles from Moscow.
The crude oil bears are on a tear this past week, blowing past WTI’s 5 and 10 day moving averages on Monday and opening below it’s 50-day MA this morning. The $80 level is likely a key resistance level, below which the path is open for the American oil benchmark to drop to the $75 level in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Energy Futures Are Drifting Quietly Higher This Morning
Energy futures are drifting quietly higher this morning as a new round of hostage negotiations between Israel and Hamas seem to show relative promise. It seems the market is focusing on the prospect of cooler heads prevailing, rather than the pervasive rocket/drone exchanges, the latest of which took place over Israel’s northern border.
A warmer-than-expected winter depressed diesel demand and, likewise, distillate refinery margins, which has dropped to its lowest level since the beginning of 2022. The ULSD forward curve has shifted into contango (carry) over the past month as traders seek to store their diesel inventories and hope for a pickup in demand, domestic or otherwise.
The DOE announced it had continued rebuilding it’s Strategic Petroleum Reserve this month, noting the addition of 2.3 million barrels of crude so far in April. Depending on what the private sector reported for last week, Wednesday’s DOE report may put current national crude oil inventories (include those of the SPR) above the year’s previous levels, something we haven’t seen since April of 2022, two months after Ukraine war began.
The latest in the Dangote Refinery Saga: Credit stall-out, rising oil prices, and currency exchange.
Click here to download a PDF of today's TACenergy Market Talk.