The March Rally In Energy Prices Has Been Erased, With RBOB, WTI And Brent All Trading Lower This Morning

Market TalkTuesday, Mar 15 2022
Pivotal Week For Price Action

The March rally in energy prices has been erased, with RBOB, WTI and Brent all trading lower this morning than where they started the month. ULSD prices haven’t quite given up all of their gains for the month yet, but they have dropped $1.70 in less than a week, which apparently is a lot.

After weeks of supply fears dominating the discussion, demand declines are suddenly taking over as 50 million people were placed on lockdown in China over the past 2 days, as the country deals with its worst COVID outbreak since the start of the pandemic 2 years ago.    

Unlike two years ago however, a lockdown like this is viewed as another possible inflation driver as factories are forced to close, adding another challenge to the beleaguered global supply network, which means central banks (probably) won’t be coming to the rescue this time. That reality seems to have equity and bond markets nervous, with 10 year treasuries moving near a 3 year high and the yield curve tightening again ahead of the FOMC meeting. 

Reports of progress in peace talks in Ukraine are also getting credit any time the market drops, even though there seem to be plenty of other headlines suggesting little progress is being made, which will come in handy whenever prices rally again. 

Likewise, reports of new negotiations between oil producing countries like Saudi Arabia and Venezuela, and consuming countries like China and the US are easy headlines to pin a move lower, and then to blame if they fail and prices rally.

From a chart perspective, refined products survived their first test of the weekly trend lines that have been in place since early December, which could give the bulls a reason to buy this very large dip. 

Speaking of buyers: You may not even know there’s a pullback happening if you live on the West Coast as CARBOB basis values have spiked this week, offsetting the drop in RBOB futures.  While Midwestern fuel prices continue to trail their coastal counterparts in most cases, we’ve seen a rally of 20 cents or more for both diesel and gasoline differentials in Chicago and Group 3 trading over the past week as calendar spreads for futures have come back closer to reality, and the winter demand doldrums look to be in the rearview mirror. 

OPEC’s monthly report and the API weekly report are both due out later today, while the DOE and FOMC announcement will be out tomorrow.

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

Market Talk Update 3.15.22

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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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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.