The Rumor Mill Is Hard At Work This Week With Multiple Reports Of New Ideas Coming From The White House To Ease High Fuel Prices
The rumor mill is hard at work this week with multiple reports of new ideas coming from the White House to ease high fuel prices – which were already on a path to easing themselves – now roiling prices.
Monday morning saw reports that the White House was considering a release of the North East Strategic Heating Oil reserve to ease diesel prices in the region, but the market seemed to largely shrug off that news as prices had already fallen more than $1/gallon in the prior week, and a 1 million barrel release would do little to improve inventory levels that are 20 million barrels below their average, and 40 million barrels below where they were 2 years ago.
Monday afternoon after the close another report suggested the White House was also considering pollution waivers on gasoline to lower prices this summer. RBOB futures dropped more than a dime following that report, and held those losses overnight, even though there were no details about what those waivers would be, and as we’ve seen with previous emergency waivers, the NYMEX specs probably won’t change anyway.
The EPA announced Monday that it would publish its 2023 RFS targets by next April, as part of a settlement over a lawsuit for the agency not meeting its deadlines for the program which has forced the industry to guess at obligations for years. The agency is also expected to finalize the 2021 and 2022 RVOs – which should have been finalized 6-18 months ago – by June 3.
California Carbon Credits meanwhile plunged to a new low Monday south of $100/LCFS credit. This is bad news for producers of renewable fuels as their subsidy is rapidly shrinking. In January of 2021 producers of Renewable or Bio diesel with a CI score of 30 were receiving $1.65/gallon from the LCFS credits generated, and today those producers are “only” receiving around $.77 gallon. Don’t feel too bad however, that 77 cents/gallon is still on top of the $1/gallon Blenders Tax Credit (which is set to expire at the end of this year) and the $1.5-$3/gallon in RIN subsidy depending on the product.
D4 RIN values may prove particularly pivotal for producers as the increase in RIN values over the past 18 months largely offsets the drop in LCFS credit values, and may help keep some products heading for the US West Coast that may have otherwise gone to Europe.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllGasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading
Gasoline futures are leading the energy complex higher this morning with 1.5% gains so far in pre-market trading. Heating oil futures are following close behind, exchanging hands 4.5 cents higher than Friday’s settlement (↑1.3%) while American and European crude oil futures trade modestly higher in sympathy.
The world’s largest oil cartel is scheduled to meet this Wednesday but is unlikely they will alter their supply cuts regimen. The months-long rally in oil prices, however, has some thinking Saudi Arabia might being to ease their incremental, voluntary supply cuts.
Tropical storm Rina has dissolved over the weekend, leaving the relatively tenured Philippe the sole point of focus in the Atlantic storm basin. While he is expected to strengthen into a hurricane by the end of this week, most projections keep Philippe out to sea, with a non-zero percent chance he makes landfall in Nova Scotia or Maine.
Unsurprisingly the CFTC reported a 6.8% increase in money manager net positions in WTI futures last week as speculative bettors piled on their bullish bets. While $100 oil is being shoutedfromeveryrooftop, we’ve yet to see that conviction on the charts: open interest on WTI futures is far below that of the last ~7 years.
Click here to download a PDF of today's TACenergy Market Talk.
The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.
The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.
We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.
The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.
There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.
As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.
Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.