Energy Futures Stumbling Out Of Gates

Market TalkMonday, Apr 15 2019
Bulls Have Taken Back Control Of Energy Markets

Energy futures are stumbling out of the gates to start the week with most contracts down 1% or more overnight as the global oil supply outlook that seemed so bullish a week ago suddenly appears to have spare capacity starting to build.

Reports that Russia is considering ending its oil production cut agreement with OPEC to gain back market share from US exporters is getting credit for the early selling this morning, although the interview referenced makes it clear no decisions have been made. Right on cue, the EIA Published a note this morning highlighting the surge in US oil exports in 2018, with Asia the largest regional destination, while Canada remains the largest single importer of US crude.

In addition, Iranian exports are still looking for a home as buyers shy away now that the exemptions to US sanctions are set to expire, adding more supply capacity to the world market.

This looks like it could be a pivotal week for gasoline prices as the last of the winter-grade barrels stop pricing for the season, and futures are close to breaking the bullish trend-line that’s been in place since January. If that trend breaks, and last week did mark the seasonal top, there’s a strong case to be made for gasoline prices to lose another 20 cents in short order.

Money managers added to their net-length in WTI for a 7th straight week, and for a 13th out of 14 weeks to start the year for Brent. The enthusiasm, though long in duration, is a little light in volume as both contracts are just now reaching their 5-year average for bets on higher prices from the large speculator category of trader.

After a 2 week dip into net-short territory, money manager holdings of ULSD have returned to a net-long position. RBOB meanwhile has the most speculative action – relative to seasonal norms – as those holdings remain above the 5 year seasonal range for a 5th straight week.

Producers meanwhile seem content to sell into the strength in prices, with swap dealer net-short positions in WTI increasing for an 8th straight week.

Baker Hughes reported 2 more oil rigs were put to work last week, a 2nd straight increase after 6 consecutive weekly declines suggesting that higher prices may stabilize drilling activity.

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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.

Pivotal Week For Price Action
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.