Downside Pressure On The Petroleum Complex

Market TalkWednesday, Aug 19 2020
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Yet another rally in energy futures has failed to sustain itself as prices start Wednesday’s session in the red, leaving prices stuck back in their sideways pattern, even as the S&P 500 rallies to new all-time highs this week. 

The API was said to report a build in gasoline stocks last week of nearly five million barrels, which seemed to put immediate downside pressure on the entire petroleum complex that carried through the overnight session, even though crude and diesel stocks were estimated to have draws on the week of 4.3 and one million barrels, respectively. The DOE’s weekly report is due out at its normal time this morning. 

As mentioned yesterday, both WTI and RBOB futures were looking toppy as they failed to break through the top end of their summer ranges, leaving them susceptible to a larger round of selling that could test the $40 mark for WTI and $1.16 for RBOB in short order.

OPEC & Friends are meeting today, but there’s a lack of chatter on new output quotas, with reports that the Saudi’s are more concerned with the cheaters in the group than making a new deal.

Colonial pipeline is still working to repair and re-open its main gasoline line that’s been shut for almost five days following a leak. While no specific timeline has been given, pipeline schedules and muted price action for both physical and futures contracts suggests they remain on track for reopening in the next few days. Allocations in markets north of the leak remain restricted as suppliers protect their contract accounts, but physical outages are not yet being reported. 

RINs continued to rally Tuesday, pushing D4 RINs to a 2.5 year high, after the President promised to talk to the EPA about small refinery exemptions during a trip to Iowa to survey the extensive fallout of last week’s derecho. The storms have damaged nearly half of the state’s crop, and sent ethanol prices rallying along with corn and soybean prices. 

Speaking of storms, the NHC still favors two new names storms developing in the Atlantic basin over the next five days, both of which still have some potential to threaten the U.S. Coasts. The first system in line could potentially be a gulf coast threat if it can get past the Yucatan peninsula, and the second looks like it could be heading towards Florida next week. The names of these storms will depend on which develops first. There’s a third potential system coming right behind these two, and as we near the peak of this record-setting season, it’s likely we’ll see new potential systems 1-2 times per week as tropical waves move off the west coast of Africa.

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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.