Refined Products Are Ticking Lower By A Penny To Start Friday’s Session
Refined products are ticking lower by a penny to start Friday’s session after a big Thursday rally once prices broke out of their sideways trading range.
ULSD led the charge Thursday, closing the gap left behind at the end of November when the DEC futures contract expired. The diesel contract is currently holding above its 200-day moving average, which gives another technical reason for prices to make a run at the $3 mark in the coming weeks. RBOB futures also reached their highest level since the end of November, and although some short term indicators are flashing overbought signals, suggesting a corrective pullback is due, longer term the charts are set up for a spring rally that should at least threaten the $2.50 mark in the coming weeks.
The ongoing attacks in the Red Sea continue to be a convenient option for headline writers anytime the market rallies, which seems to ignore the fact that Saudi Arabia is still moving oil and products through the region, and Qatar said that diverting LNG carriers may delay some shipments but would not have a major impact on its ability to supply customers.
Adding to the fervor Thursday were reports that one of Russia’s largest refineries was on fire after Ukrainian drone attacks, even though Russian exports are no longer heading towards Europe or the US, so any impacts on supplies will be indirect at most.
The sell-off continues for Mid-continent product differentials, with ULSD basis in both the Group 3 and Chicago markets trading below a 50 cent discount to futures this week.
RIN values continued their plunge, dropping to 60 cents for both D4 and D6 values, marking a 3.5 year low for D6 (ethanol) contracts and a 4 year low for D4s.
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View AllWeek 18 - US DOE Inventory Recap
Crude Oil, Gasoline, And Diesel Benchmarks Are All Trading >1% Lower To Start The Day
Energy prices are sinking again this morning, albeit with a little more conviction than yesterday’s lackadaisical wilting. Crude oil, gasoline, and diesel benchmarks are all trading >1% lower to start the day with headlines pointing to an across-the-board build in national inventories as the source for this morning’s bearish sentiment. The Department of Energy’s official report is due out at its regular time this morning (9:30am CDT).
WTI has broken below its 100-day moving average this morning as it fleshed out the downward trend that began early last month. While crossing this technical threshold may not be significant in and of itself (it happened multiple times back in February), the fact that it coincides with the weekly and monthly charts also breaking below a handful of their respective moving averages paints a pretty bearish picture in the short term. The door is open for prices to drop down to $75 per barrel in the next couple weeks.
Shortly after the EIA’s weekly data showed U.S. commercial crude inventories surpassing 2023 levels for the first time this year, their monthly short-term energy outlook is forecasting a fall back to the bottom end of the 5-year range by August due to increasing refinery runs over the period. However, afterward the administration expects a rise in inventories into 2025, citing continued production increases and loosening global markets hindering the incentive to send those excess barrels overseas. The agency also cut back their average gas and diesel price forecasts for the first time since February with the biggest reductions in the second and third quarter of this year.
The STEO also featured their famed price prediction for WTI, stating with 95% confidence that the price for crude oil will be between $40 and $140 through 2026.
Need a general indication of the global crude oil supply? Most headlines seem to be covering a shortage of a different type of oil, one that we haven’t turned into fuel (yet).
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The Perceived Cooling Of Regional Tensions In The Middle East Area Attributing To The Quiet Start To Today’s Trading Session
The energy complex is drifting lower this morning with RBOB futures outpacing its counterparts, trading -.9% lower so far to start the day. The oils (WTI, Brent, heating) are down only .2%-.3% so far this morning.
The perceived cooling of regional tensions in the Middle East area attributing to the quiet start to today’s trading session, despite Israel’s seizure of an important border crossing. A ceasefire/hostage-release agreement was proposed Monday, and accepted by Hamas, but rejected by Israel as they seemingly pushed ahead with their Rafah offensive.
U.S. oil and natural gas production both hit record highs in 2023 and continue to rise in 2024, with oil output currently standing at 13.12 million barrels per day and January 2024 natural gas production slightly exceeding the previous year. With WTI currently changing hands at higher than year-ago levels, this increased production trend is expected to continue despite a decrease in rigs drilling for these resources.
Less than a week after the Senate Budget Committee’s hearing centered on the credibility of big oil’s climate preservation efforts, a major oil company was reported to have sold millions of carbon capture credits, without capturing any carbon. Fraud surrounding government subsidies to push climate-conscious fuel initiatives is nothing new, on a small scale, but it will be interesting to see how much (if any) of the book is thrown at a major refiner.
Today’s interesting read: sourcing hydrogen for refining.
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