The First 4.5 Trading Days Of March Have Smashed Records For Daily Price Swings And Increases

Market TalkMonday, Mar 7 2022
Pivotal Week For Price Action

Good news: gasoline prices are down 28 cents and diesel prices are down 33 cents from where they were trading last night. 

Bad news: both contracts reached record highs last night in the first few minutes of trading, and are still showing large gains from Friday despite the pullback. 

The first 4.5 trading days of March have smashed records for daily price swings and increases as the world comes to grips with the idea that there is no short term solution to replace Russian petroleum supplies, making the risk of both volatility and government intervention higher than ever.  For both ULSD and RBOB, these would be the largest monthly gains on record if prices hold, and we’re not even through a full week yet. 

For ULSD, we’ve already seen the biggest monthly trading range ($1.30/gallon) in just 4.5 days of trading, while the RBOB range of $.95 ranks third all-time behind the March 2020 and December 2008 market meltdowns that both surpassed $1/gallon. 

An official Russian oil embargo (vs the current unofficial and voluntary embargo) was floated over the weekend, while renewed negotiations to reduce sanctions and increase oil output with both Iran and Venezuela seem to be going nowhere, and both seem to be factors in the latest price spike.    

Already, even though energy products aren’t officially sanctioned (yet), we’re seeing dramatic signs of the impact a lack of international buyers is having on its refining operations, as plants are forced to cut run rates and halt crude intake due to a lack of storage for their production. Refinery maintenance and upgrades are also expected to be hampered without access to foreign technology.   

Regional supplies in the US have been disrupted over the past two weeks by a pair of Kinder Morgan pipeline issues, and a handful of (so far minor) refinery disruptions. The coastal markets remain tight in general, while inland markets remain well supplied, and lacking transportation to help alleviate their glut, and/or take advantage of the record spreads from the middle of the country to the edges.

RIN values pulled back on Friday, even as Corn, Soybean (and refined product) prices continued to spike.  A “news” article suggesting the White House was considering a biofuel waiver to help curb food inflation seems to have been the driver of that selling. Other non-food-based environmental credits like the European EUA’s, and California’s LCFS and CCA credits are all seeing heavy selling as expectations rise for both demand destruction, and a change of heart from governments that just a few weeks ago still thought having clean energy was more important than having energy. 

Short covering was the theme of the week for money managers, that saw large reductions in the short positions held in energy futures. WTI and Brent saw some modest new length enter the market, but the lack of “piling on” at least in the first two days of the week when the CFTC data is collected, suggested these huge swings may be too hot to handle, even for the big speculators.

Baker Hughes reported a decline of 3 oil rigs working in the US last week, snapping a 5 week streak of increases. Natural gas rigs increased by 3, the 9th straight week of gains for natural gas focused drilling.

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

Market Talk Update 3.7.22

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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.

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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.