The Bulls Survived A Big Test On Monday

Market TalkTuesday, Nov 16 2021
Pivotal Week For Price Action

The bulls survived a big test Monday, bouncing sharply off of 6 week lows and continuing to rally overnight, putting the risk of a price collapse on hold for now, although weekly charts continue to favor a move lower by year end. 

Multiple refinery snags seem to have helped contribute to the sudden about-face in prices Monday, including reports that the country’s largest refinery was having to reduce production after a failed unit restart a month after an unplanned shutdown. The other indicator that the move was supply driven was that time spreads continued to strengthen, pushing several contracts into even steeper backwardation. 

Between the COP26 pledges and 2,700 page US “infrastructure” bill, there’s a lot of data to sort through this week that could theoretically at least impact energy markets. Based on the price action in petroleum futures, the early reaction from the market is that none of this is going to have much impact any time soon. Read here on how the funds from this new law will flow through state governments, starting 6 months from now.

One relatively small (you know, only $5 billion) piece of the bill signed yesterday will be good test for EV market, as it provides funds to buy battery powered school buses. How the industry can handle this process, whether or not those buses can even be produced any time soon, may go a long way to signaling the viability of the electric car dreams held by so many. Meanwhile, how to power those vehicles will certainly become a growing point of contention as coal prices in the US have reached a 12 year high

Supply chain snags are slowing the gains in US crude oil output, and helps explain why the drilling rig count haven’t jumped more with prices at 7 year highs. Here too the rapidly changing climate landscape may be playing a role, as a WSJ article this morning suggests that funding for US drillers will be more challenging after COP26, which may mark the end of decades of cheaper production.  Of course both points are welcome news to OPEC, who is already urging caution from producers as signs mount that the world is shifting to a crude surplus. 

Speaking of which, the IEA noted the rise in supply in its monthly oil market report. A few highlights from that report are included below. 

-The world oil market remains tight by all measures, but a reprieve from the price rally could be on the horizon. Contrary to hopes expressed in Glasgow at COP26 this is not because demand is declining, but rather due to rising oil supplies.

-Global oil production is already rising. In October, oil supplies leapt by 1.4 mb/d … A further boost of 1.5 mb/d is expected over November and December even as OPEC+ disregarded pleas from major consumers to ramp up beyond a monthly allocated 400 kb/d to cool prices. 

-Refinery activity is picking up after autumn maintenance, while end-user demand is on track to strengthen further as more countries open up to international travel

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

Market Talk Update 11.16.21

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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.

Pivotal Week For Price Action
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.