World Anxiously Awaits U.S. Election Results
Energy prices are moving higher for a third straight day as the world anxiously awaits results of the U.S. elections.
After moving higher in the evening, energy and equity futures both saw a slump overnight after it became clear that a clear winner in the U.S. Presidential race would not be named immediately, and the suggestion that the Supreme Court would need to get involved seemed to temporarily spook the markets. After roughly two hours of trading in the red, both asset classes were able to climb back higher in the early morning hours. We could see more similar swings throughout the day as the headlines of vote tallies continue to roll in.
While the momentum has clearly shifted near-term after prices survived a big selloff Sunday night, weekly and monthly charts continue to show a downward sloping trend, that favors lower prices this winter unless WTI can claw back above the $40 mark this week.
The API reported a large draw in oil inventories of eight million barrels last week, which helped oil and product prices keep their upward momentum Tuesday evening. Gasoline inventories built by 2.4 million barrels, while distillates had a small decline of 577,000 barrels. The DOE’s weekly report is due out at its normal time this morning.
Hurricane Eta is moving over Central America, and is now expected to hit Florida early next week. Forecasts suggest that it will be a tropical storm when it reaches the state, but based on what we’ve seen with storms over the Caribbean blowing up rapidly this year, don’t be surprised if that changes this weekend. The current path keeps the storm well to the south and east of oil platforms and refineries, so this should be a non-event for fuel supplies beyond some possible temporary closures at Florida ports.
The EIA this morning highlighted the shift in energy flows between the U.S. and Mexico over the past decade. Oil flows from Mexico have tumbled as Pemex struggles with corruption and ineptitude, while U.S. exports of refined products have soared while Mexican refineries run well below capacity. While these flows have become a more important outlet for U.S. refiners, new policies being discussed south of the border to reinvigorate Pemex have the potential to slow the flow of gasoline and diesel in the coming years.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllEnergy Prices Up Over 2% Across The Board This Morning
Refined product futures traded in an 8-10 cent range yesterday with prompt heating oil settling up ~6 cents and RBOB ending up about flat. Oil prices clawed back some of the losses taken in the first two full trading days of the week, putting the price per barrel for US crude back over the $70 mark. Prices are up just over 2% across the board this morning, signifying confidence after the Senate passed the bipartisan debt ceiling bill last night.
The EIA reported crude oil inventories up 4.5 million barrels last week, aided by above-average imports, weakened demand, and a sizeable increase to their adjustment factor. The Strategic Petroleum Reserve continues to release weekly through June and the 355 million barrels remaining in the SPR is now at a low not seen since September 1983. Exports increased again on the week and continue to run well above last year’s record-setting levels through the front half of the year. Refinery runs and utilization rates have increased to their highest points this year, both sitting just above year-ago rates.
Diesel stocks continue to hover around the low end of the 5-year range set in 2022, reporting a build of about half of what yesterday’s API data showed. Most PADDs saw modest increases last week but all are sitting far below average levels. Distillate imports show 3 weeks of growth trending along the seasonal average line, while 3.7 million barrels leaving the US last week made it the largest increase in exports for the year. Gasoline inventories reported a small decline on the week, also being affected by the largest jump in exports this year, leaving it under the 5-year range for the 11th consecutive week. Demand for both products dwindled last week; however, gas is still comfortably above average despite the drop.
The sentiment surrounding OPEC+’s upcoming meeting is they’re not likely to extend oil supply cuts, despite prices falling early in the week. OPEC+ is responsible for a significant portion of global crude oil production and its policy decisions can have a major impact on prices. Some members of OPEC+ have voluntarily cut production since April due to a waning economic outlook, but the group is not expected to take further action next week.
Click here to download a PDF of today's TACenergy Market Talk
Prices Are Mixed This Morning As The Potential Halt In U.S. Interest Rate Hikes
Bearish headlines pushed refined products and crude futures down again yesterday. Prompt RBOB closed the month at $2.5599 and HO at $2.2596 with WTI dropping another $1.37 to $68.09 and Brent losing 88 cents. Prices are mixed this morning as the potential halt in U.S. interest rate hikes and the House passing of the US debt ceiling bill balanced the impact of rising inventories and mixed demand signals from China.
The American Petroleum Institute reported crude builds of 5.2 million barrels countering expectations of a draw. Likewise, refined product inventories missed expectations and were also reported to be up last week with gasoline adding 1.891 million barrels and diesel stocks rising 1.849 million barrels. The market briefly attempted a push higher but ultimately settled with losses following the reported supply increases implying weaker than anticipated demand. The EIA will publish its report at 10am this morning.
LyondellBasell announced plans yesterday to delay closing of their Houston refinery, originally scheduled to shut operations by the end of this year, through Q1 2025. The company “remains committed to ceasing operation of its oil refining business” but the 289,000 b/d facility remaining online longer than expected will likely have market watchers adjusting this capacity back into their balance estimates.
Side note: there is still an ongoing war between Russia and Ukraine. Two oil refineries located east of Russia's major oil export terminals were targeted by drone attacks. The Afipsky refinery’s 37,000 b/d crude distillation unit was struck yesterday, igniting a massive fire that was later extinguished while the other facility avoided any damage. The attacks are part of a series of intensified drone strikes on Russian oil pipelines. Refineries in Russia have been frequently targeted by drones since the start of the military operation in Ukraine in February 2022.