Severe Weather Across Large Parts Of The Country, The NHC Is Giving 50% Odds Of A Tropical System Being Named Over The Eastern Atlantic In The Coming Days

Market TalkFriday, Jun 16 2023
Pivotal Week For Price Action

ULSD is leading the energy complex higher after breaking out above the sideways trading range that had held prices the past 7 weeks and is currently holding gains of nearly 15 cents/gallon for the week. If the bulls can maintain the upward momentum and settle above $2.50 today, there’s a strong case to be made on the charts that we’ll soon see prices run up to the 2.60-2.70 range that held prices for about a month this spring. 

Values to ship gasoline on Colonial’s line 1 collapsed Thursday after reports of an upset at Exxon’s Baytown refinery, as traders seem be to anticipating a shortage at one of the largest origin points on the pipeline, even though USGC basis values didn’t move much on the news.  Meanwhile, Marathon’s Texas City refinery (aka Galveston Bay) refinery continues to have challenges a month after another deadly fire broke out at the facility, with two more unit upsets reported to the TCEQ this week.  

California carbon allowances (CCA) prices continue to rally to their highest levels of the year following a workshop Wednesday where regulators presented their intentions to promote tighter requirements and higher credit values.  There is now a 3 week window for stakeholders to provide feedback on the revised plan before it moves into the formal rulemaking stages. Interestingly enough, California’s LCFS credit values have dropped near a 2-month low, demonstrating the difference between a market-based credit system that’s incentivized a huge influx of renewable fuel production, and the Cap & trade program that just makes up the amount of credits they’ll sell.

So far there are no reports of damage to energy supply infrastructure from the wave of severe storms sweeping across the southern US this week. So far there are no reports of upsets from either of the 2 TX Panhandle refineries following last night’s deadly tornado in Perryton TX, which is roughly 75 miles northeast of those facilities, although Valero’s McKee facility did report an upset due to thunderstorms Tuesday night and the Borger facility continues to work on repairs after being damaged in the Christmas blizzard.

Besides the outbreak of severe weather across large parts of the country, the NHC is giving 50% odds of a tropical system being named over the eastern Atlantic in the coming days.  This system is currently moving off the west coast of Africa and has an early path that could allow it to threaten the US (in an area that’s developed some of the largest storms on record) so will need to be watched. It is rare for a storm to develop in this area so early in the season, with only 3 storms ever forming in this region in June, but with waters already at record warm temperatures, don’t expect this season to follow the script.

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Market Talk Update 06.16.2023

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Pivotal Week For Price Action
Market TalkTuesday, Nov 28 2023

Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week

The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday. 

Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.

Reversal coming?  Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.

Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness. 

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Pivotal Week For Price Action
Market TalkMonday, Nov 27 2023

After Another Black Friday Selloff Pushed Energy Futures Sharply Lower In Last Week’s Holiday-Shortened Trading

After another Black Friday selloff pushed energy futures sharply lower in last week’s Holiday-shortened trading, we’re seeing a modest bounce this morning. Since spot markets weren’t assessed Thursday or Friday, the net change for prices since Wednesday’s settlement is still down more than 6-cents for gasoline and almost 5-cents for diesel at the moment.

OPEC members are rumored to be nearing a compromise agreement that would allow African producers a higher output quota. Disagreement over that plan was blamed on the cartel delaying its meeting by 4-days last week which contributed to the heavy selling. The bigger problem may come from Russia, who announced plans last week to increase its oil output once its voluntary cut agreement ends now that price cap mechanisms are proving to be ineffective

While an uneasy truce in Gaza held over the weekend, tensions on the Red Sea continued to escalate with the US Navy intervening to stop another hijacking and being rewarded for its efforts by having missiles fired at one of its ships.  

RIN values came under heavy selling pressure Wednesday afternoon following a court overturning the EPA’s ruling to deny small refinery hardship waivers to the RFS. Those exemptions were a big reason we saw RINs drop sharply under the previous administration, and RINs were already on due to the rapid influx of RD supply this year.

More bad news for the food to fuel lobby: the White House is reportedly stalling plans to allow E15 blending year-round after conflicting studies about ethanol’s ability to actually lower carbon emissions, and fuel prices. Spot prices for ethanol in Chicago reached a 2.5 year low just ahead of the holiday.  

Baker Hughes reported the US oil rig count held steady at 500 active rigs last week, while natural gas rigs increased by 3. 

The first of perhaps several refining casualties caused by the rapid increase in new capacity over the past two years was reported last week. Scotland’s only refinery, which has a capacity of 150mb/day is preparing to shutter in 2025.

The CFTC’s commitment of traders report was delayed due to the holiday and will be released this afternoon.

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Pivotal Week For Price Action
Market TalkWednesday, Nov 22 2023

Week 47 - US DOE Inventory Recap