Refined Products Along With Oil Prices Are Moving Higher This Morning With Tightening Global Supply

Market TalkMonday, Dec 6 2021
Pivotal Week For Price Action

After 7 straight weeks of declines that have knocked prices down more than 20%, refined products are moving higher along with oil prices this morning with tightening global supply and some Omicron optimism both getting credit for the early rally.  We saw nickel rallies for refined products get wiped out in 4 out of 5 sessions last week, so it’s hard to get too bullish about these gains until we see them last a whole day.       

RIN prices had avoided the volatility for most of the week, but crumbled Thursday and Friday following reports that the EPA was (finally) set to announce RVOs that would reduce the amount of renewable blending required by refiners. The sellers are back out this morning following a report late Friday that the EPA is also considering allowing new kinds of renewable fuels – perhaps even renewable electricity – to generate RINs, and could vastly increase the supply of those credits if true. On the other hand, if the agency does allow more products to generate RINs, that could be an excuse to increase the RVO. 

The clowns are exiting the Volkswagen: Money managers slashed their net length across the petroleum complex in the last week of November, which no doubt played a big role in the Black Friday rout, in addition to the volatility we saw last week. ULSD, RBOB and Brent crude all saw reductions in both long and short positions as hedge funds seem to be bailing out of the petroleum game, while WTI and Gasoil saw a huge influx of new short bets in addition to the long liquidation.

The moves were even more dramatic in carbon credits as money managers bailed out of both CCA and RGGI contracts at an unprecedented rate last week. A margin hike was given credit for part of the sharp move lower in CCA’s after a 6 month rally that doubled their value, since those funds prefer to trade with other people’s money as long as it doesn’t cost them much, and the reality that emissions have actually declined in recent quarters, which is lowering demand. 

Baker Hughes report no change in the total number of oil drilling rigs active last week, as an increase of 5 rigs in New Mexico offset declines in Texas, Louisiana and California.

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Market Talk Update 12.06.21

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Pivotal Week For Price Action
Market TalkThursday, Mar 28 2024

Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

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

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Market TalkWednesday, Mar 27 2024

Week 12 - US DOE Inventory Recap

Pivotal Week For Price Action
Market TalkWednesday, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

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