Complex Continues To Move Sideways
Energy futures are slipping for a 3rd straight day, but are not threatening Friday’s low trades, as the complex continues to move sideways, languishing through the winter doldrums stuck in technical-trading purgatory.
The API was said to show inventory builds across the board last week, albeit relatively minor in size. Crude oil stocks were reported to increase about 2.5 million barrels, gasoline inventories were up 1.7 million, while diesel stocks increased by around 140,000 barrels.
The EIA’s version of weekly stats is due out at its regular time. Last week’s big number was the large drop in refinery run rates. With numerous unplanned outages reported since that time, there could be another large decline today. In addition to the weather-related events of the past week, there are reports the multiple refineries in the midcontinent may be moving up their maintenance schedules previously planned for later in 2019, betting that it’s better to shut units now when margins are soft, than later in the year when many expect a prices could surge as the 2020 IMO deadline approaches.
There are still more questions than answers on how the chaos in Venezuela will play out. The story of the past 24 hours has been the count of oil tankers idling off the coast, stranded by the uncertainty.
Several reports are claiming that OPEC is attempting to formalize its cooperation with Russia and the other oil producing countries that have come to terms on production cuts to prop up prices over the past 2 years. At this point, it appears that the Russians aren’t cooperating. Shocking.
The CFTC issued the 2nd “catch up” commitments of traders report Tuesday, showing that money managers (aka hedge funds, aka large speculators) were still cautious about betting on oil and refined products in the last week of 2018. Considering the meltdown they’d just lived through on Christmas eve, it’s hard to blame them. Then again, based on the price rally, and 4 straight weeks of new speculative length additions in Brent that we’ve seen, it seems like a foregone conclusion that the adrenaline junkies who are “managing” money have increased their bets in 2019.
One other item to watch in the COT reports: Swap positions (a proxy for producer hedging in WTI) reached a 15 month low at year-end. There have been concerns that hedge funds leaving the oil market may make forward hedging more challenging for producers, and that’s one place we should be able to figure out whether or not that’s true.
Latest Posts
Gasoline Futures Are Leading The Way Lower This Morning
The Sell-Off Continues In Energy Markets, RBOB Gasoline Futures Are Now Down Nearly 13 Cents In The Past Two Days
Week 15 - US DOE Inventory Recap
Prices To Lease Space On Colonial’s Main Gasoline Line Continue To Rally This Week
Social Media
News & Views
View All
Gasoline Futures Are Leading The Way Lower This Morning
It was a volatile night for markets around the world as Israel reportedly launched a direct strike against Iran. Many global markets, from equities to currencies to commodities saw big swings as traders initially braced for the worst, then reversed course rapidly once Iran indicated that it was not planning to retaliate. Refined products spiked following the initial reports, with ULSD futures up 11 cents and RBOB up 7 at their highest, only to reverse to losses this morning. Equities saw similar moves in reverse overnight as a flight to safety trade soon gave way to a sigh of relief recovery.
Gasoline futures are leading the way lower this morning, adding to the argument that we may have seen the spring peak in prices a week ago, unless some actual disruption pops up in the coming weeks. The longer term up-trend is still intact and sets a near-term target to the downside roughly 9 cents below current values. ULSD meanwhile is just a nickel away from setting new lows for the year, which would open up a technical trap door for prices to slide another 30 cents as we move towards summer.
A Reuters report this morning suggests that the EPA is ready to announce another temporary waiver of smog-prevention rules that will allow E15 sales this summer as political winds continue to prove stronger than any legitimate environmental agenda. RIN prices had stabilized around 45 cents/RIN for D4 and D6 credits this week and are already trading a penny lower following this report.
Delek’s Big Spring refinery reported maintenance on an FCC unit that would require 3 days of work. That facility, along with several others across TX, have had numerous issues ever since the deep freeze events in 2021 and 2024 did widespread damage. Meanwhile, overnight storms across the Midwest caused at least one terminal to be knocked offline in the St. Louis area, but so far no refinery upsets have been reported.
Meanwhile, in Russia: Refiners are apparently installing anti-drone nets to protect their facilities since apparently their sling shots stopped working.
Click here to download a PDF of today's TACenergy Market Talk.
The Sell-Off Continues In Energy Markets, RBOB Gasoline Futures Are Now Down Nearly 13 Cents In The Past Two Days
The sell-off continues in energy markets. RBOB gasoline futures are now down nearly 13 cents in the past two days, and have fallen 16 cents from a week ago, leading to questions about whether or not we’ve seen the seasonal peak in gasoline prices. ULSD futures are also coming under heavy selling pressure, dropping 15 cents so far this week and are trading at their lowest level since January 3rd.
The drop on the weekly chart certainly takes away the upside momentum for gasoline that still favored a run at the $3 mark just a few days ago, but the longer term up-trend that helped propel a 90-cent increase since mid-December is still intact as long as prices stay above the $2.60 mark for the next week. If diesel prices break below $2.50 there’s a strong possibility that we see another 30 cent price drop in the next couple of weeks.
An unwind of long positions after Iran’s attack on Israel was swatted out of the sky without further escalation (so far anyway) and reports that Russia is resuming refinery runs, both seeming to be contributing factors to the sharp pullback in prices.
Along with the uncertainty about where the next attacks may or may not occur, and if they will have any meaningful impact on supply, come no shortage of rumors about potential SPR releases or how OPEC might respond to the crisis. The only thing that’s certain at this point, is that there’s much more spare capacity for both oil production and refining now than there was 2 years ago, which seems to be helping keep a lid on prices despite so much tension.
In addition, for those that remember the chaos in oil markets 50 years ago sparked by similar events in and around Israel, read this note from the NY Times on why things are different this time around.
The DOE’s weekly status report was largely ignored in the midst of the big sell-off Wednesday, with few noteworthy items in the report.
Diesel demand did see a strong recovery from last week’s throwaway figure that proves the vulnerability of the weekly estimates, particularly the week after a holiday, but that did nothing to slow the sell-off in ULSD futures.
Perhaps the biggest next of the week was that the agency made its seasonal changes to nameplate refining capacity as facilities emerged from their spring maintenance.
PADD 2 saw an increase of 36mb/day, and PADD 3 increased by 72mb/day, both of which set new records for regional capacity. PADD 5 meanwhile continued its slow-motion decline, losing another 30mb/day of capacity as California’s war of attrition against the industry continues. It’s worth noting that given the glacial pace of EIA reporting on the topic, we’re unlikely to see the impact of Rodeo’s conversion in the official numbers until next year.
Speaking of which, if you believe the PADD 5 diesel chart below that suggests the region is running out of the fuel, when in fact there’s an excess in most local markets, you haven’t been paying attention. Gasoline inventories on the West Coast however do appear consistent with reality as less refining output and a lack of resupply options both continue to create headaches for suppliers.