ULSD And RBOB Took Out Another Layer Of Technical Resistance In Tuesday’s Session

Market TalkWednesday, Jan 12 2022
Pivotal Week For Price Action

So much for the sideways pattern. ULSD and RBOB took out another layer of technical resistance in Tuesday’s session, and made short work of following through to their next targets with 10 cent gains in the past 24 hours. Just a few days after making a run at $2.50, diesel prices are now less than a penny away from reaching a new 7 year high at $2.6080, with another big move higher looking possible if that resistance can also be taken out.  

Besides the technical strength, it appears that diesel prices are also getting a boost from winter storms hitting the East Coast, based on the strength in calendar spreads and natural gas prices in the past few days. That should provide some sense of relief to those hurt by high diesel prices that this won’t last for an extended period of time, but is also a sign that near prompt prices could see a severe spike if another polar vortex arrives, which could fulfill the technical targets closer to the $2.80 range. Short term indicators are also moving into overbought territory, so there should be a swift correction once this latest surge subsides.

So far the market continues to be able to shrug off some bearish fundamental indicators for both refined products as the API reported another huge build in gasoline inventories last week of nearly 11 million barrels, while distillates added another 3 million barrels. The DOE’s weekly report is due out at its normal time this morning, and based on the API and anecdotal evidence from fuel suppliers around the country, more large builds seem likely as last week marked the traditional trough of the winter demand doldrums. 

You can also see signs of that weak demand in Midwestern basis markets that have seen diffs plummet over the past two weeks as those regions slog through their annual January temperature and demand freeze.  In these cases, the strength we’re seeing in calendar spreads tends to push basis spreads even lower as cash markets will need to offset the relative increase in futures to attract incremental buyers. Rack markets around the country are also showing signs of capitulation with several major markets that were showing large premiums to their local spot market now offering discounts as suppliers appear to have forgotten (again) what happens in January every year. (see the charts below)

Reminder that Monday is MLK Jr. day, and while futures will trade throughout the day, there will not be a settlement posted for NYMEX contracts, and spot markets won’t be assessed, so most prices posted Friday night will carry through Tuesday.

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

Market Talk Update 1.12.22

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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.

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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.