The EIA Estimated That US Crude Oil Output Held Steady At A Record High Of 13.2 Million Barrels/Day For A 6th Straight Week

Market TalkThursday, Nov 16 2023
Pivotal Week For Price Action

Gasoline prices are trading lower for a 3rd straight day and holding just a nickel above their lows of the year. Diesel prices saw a healthy bounce off of early morning lows Wednesday thanks to healthy inventory declines reported by the DOE, but have already given back those 3-cent gains this morning.   

PADD 1 refinery runs jumped by 63mb/day last week (more than 10% of the region’s total run rate) as 6 weeks of maintenance at the Delta/Monroe refinery in Trainer PA comes to an end. So far that supply hasn’t dampened the enthusiasm in the market for colonial line space which continued to rally for both gasoline and diesel Wednesday, but as the refinery brings its remaining units back up (roughly another 100mb/day) that might soon change, or it may force Gulf Coast basis values to fall even lower. 

Those big spreads for shipping space to New York from the gulf coast are also leaving markets across the South East shorter than normal as the big shippers decide they can make more money keeping barrels moving north rather than dropping them off along the way. So far supplies are still much better than they were last November when the world still acted like it was running out of diesel, but tight allocations and short-term terminal outages than we have experienced in the past 6-months are becoming common again. 

The EIA estimated that US crude oil output held steady at a record high of 13.2 million barrels/day for a 6th straight week, despite the slowdown in drilling activity over the course of the year. The agency also changed up its weekly report structure, adding new data points to show the volumes of refinery feedstocks and natural gas liquids are being blended into the crude oil supply network, which was a big reason the EIA admitted its oil stats and demand estimates have been so wrong in recent years. The new report also will begin to split out propane inventories into a “ready for sale” category and an unfractionated category that includes Propylene which should give a more realistic view of the rapidly growing propane and petrochemical markets. 

So far there have not been any plans announced to include Renewable Diesel as a line item on the weekly report, despite that fuel’s rapid expansion, which means roughly 50% of California’s diesel inventory (and demand) won’t be properly showing up on these reports.

Chinese refinery runs dipped in October after reaching a record high in September in the face of rapidly declining crack spreads. Despite the reductions, China’s refinery throughput is still 9% higher than a year ago, and the fleet of new facilities built over the past couple years are likely to continue putting pressure on facilities across the Pacific basin. 

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Market Talk Update 11.16.2023

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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