Refined Fuel Prices Seem To Be In A State Of Quiet Confusion This Morning

Market TalkThursday, Jun 23 2022
Pivotal Week For Price Action

Refined fuel prices seem to be in a state of quiet confusion this morning after Tuesday saw 15 cent morning gains wiped out in the afternoon, and Wednesday saw 15 cent morning losses turn into gains. Adding the uncertainty, the DOE announced it would not be releasing its weekly status report due to system issues this week, and the White House is trying to change the rules of the game to lower prices.

Equity markets are also finding a bit of calm after a bout of volatility, but it seems unlikely that these quiet hours of trading will last for long given the daily moves in the Western World’s chess match with Russia. Germany warned that Russia’s move to cut off natural gas to European nations could spark a “Lehman effect” on the energy system, which obviously isn’t helping to calm any nerves.

The API reported a large build of 5.6 million barrels of US crude oil last week, while gasoline stocks increased by 1.2 million and diesel declined by 1.6 million. That will have to suffice for weekly inventory given the DOE’s system issues, but you might still keep an eye on prices during the originally scheduled release time of 10am central today so see if anyone forgot to train their trading robot to not try and trade around the release of the report.  

Major US refiners are meeting with the White House today to discuss the supply crunch, with little expectation of progress on either side, simply because there’s not a whole lot that can be done short term to deal with a long term problem.

The National Hurricane center is tracking a potential system moving over the Atlantic this week, but gives that storm low odds of development. As is often the case early in the Atlantic Hurricane season, dust from the Sahara has been limiting development of storm systems, but forecasters note those dust plumes are dissipating which will open the door for more development in the coming weeks.  

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Market Talk Update 6.23.22

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Market TalkFriday, Jun 2 2023

Energy Prices Up Over 2% Across The Board This Morning

Refined product futures traded in an 8-10 cent range yesterday with prompt heating oil settling up ~6 cents and RBOB ending up about flat. Oil prices clawed back some of the losses taken in the first two full trading days of the week, putting the price per barrel for US crude back over the $70 mark. Prices are up just over 2% across the board this morning, signifying confidence after the Senate passed the bipartisan debt ceiling bill last night.

The EIA reported crude oil inventories up 4.5 million barrels last week, aided by above-average imports, weakened demand, and a sizeable increase to their adjustment factor. The Strategic Petroleum Reserve continues to release weekly through June and the 355 million barrels remaining in the SPR is now at a low not seen since September 1983. Exports increased again on the week and continue to run well above last year’s record-setting levels through the front half of the year. Refinery runs and utilization rates have increased to their highest points this year, both sitting just above year-ago rates.

Diesel stocks continue to hover around the low end of the 5-year range set in 2022, reporting a build of about half of what yesterday’s API data showed. Most PADDs saw modest increases last week but all are sitting far below average levels. Distillate imports show 3 weeks of growth trending along the seasonal average line, while 3.7 million barrels leaving the US last week made it the largest increase in exports for the year. Gasoline inventories reported a small decline on the week, also being affected by the largest jump in exports this year, leaving it under the 5-year range for the 11th consecutive week. Demand for both products dwindled last week; however, gas is still comfortably above average despite the drop.

The sentiment surrounding OPEC+’s upcoming meeting is they’re not likely to extend oil supply cuts, despite prices falling early in the week. OPEC+ is responsible for a significant portion of global crude oil production and its policy decisions can have a major impact on prices. Some members of OPEC+ have voluntarily cut production since April due to a waning economic outlook, but the group is not expected to take further action next week.

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Pivotal Week For Price Action
Market TalkThursday, Jun 1 2023

Prices Are Mixed This Morning As The Potential Halt In U.S. Interest Rate Hikes

Bearish headlines pushed refined products and crude futures down again yesterday. Prompt RBOB closed the month at $2.5599 and HO at $2.2596 with WTI dropping another $1.37 to $68.09 and Brent losing 88 cents. Prices are mixed this morning as the potential halt in U.S. interest rate hikes and the House passing of the US debt ceiling bill balanced the impact of rising inventories and mixed demand signals from China.

The American Petroleum Institute reported crude builds of 5.2 million barrels countering expectations of a draw. Likewise, refined product inventories missed expectations and were also reported to be up last week with gasoline adding 1.891 million barrels and diesel stocks rising 1.849 million barrels. The market briefly attempted a push higher but ultimately settled with losses following the reported supply increases implying weaker than anticipated demand. The EIA will publish its report at 10am this morning.

LyondellBasell announced plans yesterday to delay closing of their Houston refinery, originally scheduled to shut operations by the end of this year, through Q1 2025. The company “remains committed to ceasing operation of its oil refining business” but the 289,000 b/d facility remaining online longer than expected will likely have market watchers adjusting this capacity back into their balance estimates.

Side note: there is still an ongoing war between Russia and Ukraine. Two oil refineries located east of Russia's major oil export terminals were targeted by drone attacks. The Afipsky refinery’s 37,000 b/d crude distillation unit was struck yesterday, igniting a massive fire that was later extinguished while the other facility avoided any damage. The attacks are part of a series of intensified drone strikes on Russian oil pipelines. Refineries in Russia have been frequently targeted by drones since the start of the military operation in Ukraine in February 2022.

Pivotal Week For Price Action
Market TalkThursday, Jun 1 2023

Week 22 - US DOE Inventory Recap