Teeter-Totter Trading Continues

Market TalkWednesday, Oct 21 2020
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The teeter totter trading continues as the petroleum complex slips back into the red Wednesday after an optimism-fueled rally in Tuesday’s session. The modest sell-off in gasoline and diesel, despite healthy inventory declines on the week, suggest the market continues to care more about the potential for stimulus than short term fundamentals.

The API reported a large decline in diesel stocks of six million barrels last week, while gasoline inventories dropped 1.6 million barrels. Oil inventories showed a modest build of 584,000 barrels as refinery runs dipped once again.  The DOE’s weekly estimates will be out at their normal time this morning.

New peace agreements between Israel and the UAE are already shaking up the oil trade as a new pipeline agreement is in the works that would bring oil to Europe without having to transit the Suez canal. While tensions seem to be easing in the Middle East, they’re apparently rising in Europe as the U.S. moved to prevent construction of Russia’s natural gas pipeline to Germany by placing sanctions on companies involved in the project.   

Total reported a unit upset that caused a containment issue at its Pt Arthur, TX refinery overnight. So far U.S. Gulf Coast basis markets don’t appear to be worried about this unplanned event, as values are little changed amidst the transition to November pipeline cycles.   

While petroleum prices continue to chop back and forth, ethanol and D6 RIN prices are staging a strong rally, trying to keep pace with surging corn prices benefitting from strong exports and an early blizzard that may disrupt harvest activity across the northern parts of the country. RIN values are also heavily influenced by the winds in Washington D.C. and are likely to see more volatility in the next two weeks as we learn whether or not there will be a changing of the guard in the White House and EPA.

Consolidation continues: A new acquisition in the oil patch, the third largest deal in as many weeks, may be a sign that the larger producers are feeling more optimistic about the future and are ready to start bargain hunting.

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TACenergy MarketTalk Update 102120

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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.

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

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