Gasoline Futures Attempted To Pull Energy Complex Higher

Market TalkFriday, Feb 1 2019
Petroleum Complex Selling Off

Gasoline futures are attempted to pull the rest of the energy complex higher to start Friday’s trading as a rash of refinery issues have encouraged buyers to push up near-term prices. Diesel futures are still trading in the red however as a quick 50-70 degree warm-up after this week’s record-setting cold snap will end the spike in heating demand. Thursday’s session will be remembered for another large reversal in oil and refined products, after WTI and ULSD briefly hit new highs for the year, showing that the bulls may be lacking conviction to break out of sideways trading range, but most contracts did finish January with healthy gains, snapping a 3 month losing streak.

The list of Midwestern refineries having issues due to extreme cold continued to grow Thursday, with outages reported and/or rumored at Citgo, BP, Marathon, Husky and P66 plants in the region, and strong cash market buying (note the Chicago RBOB basis values in the chart below) suggesting they weren’t the only facilities having problems. The two big questions become 1) was any long term damage done and 2) will consumers even notice given the large numbers of businesses & schools shuttered due to the weather.

Those refinery outages, coupled with the large drop in total US refinery runs the DOE reported for last week, seems to be helping gasoline time & crack spreads find a bid in the past couple of days. With March futures taking the prompt position today, there is now a 20 cent spread between the first and second RBOB contracts as we approach the always-volatile spring RVP transition.

It’s been a busy week of earnings reports for all segments of the energy industry. A few common themes seem to be a continued race to build infrastructure that will support the latest US Oil boom, good – not great – domestic consumption, and plenty of concern about the global economy in 2019.

The January jobs report was released this morning, in which the Bureau of Labor Statistics seems to have given credence to one of Mark Twain’s borrowed phrase about the 3 types of lies. The agency made a huge cut back in December’s estimated job growth from 312k to 222k jobs for the month. The January figure was estimated at 304k jobs, while the official unemployment rate ticked up .01% to 4.0%. If you’re wondering, the bureau didn’t count the hundreds of thousands of Federal employees who were not being paid as unemployed in the official numbers. The U-6 rate, which doesn’t exclude unemployed people the BLS doesn’t classify as unemployed, was up to 8.1% from 7.6% the week prior. Stocks and energy futures seemed to tick up slightly after the report as this bit of good news for January, bad news for December, seems to add to the “Patient Fed” plan that’s encouraged investors since Wednesday’s FOMC announcement.

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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.

Pivotal Week For Price Action
Market TalkTuesday, Mar 26 2024

Refined Products Seeing Small Losses Of Around A Penny While Crude Oil Contracts Hover Just Above Break Even

Energy futures are taking a breather to start Tuesday’s trading, with refined products seeing small losses of around a penny while crude oil contracts hover just above break even.

No new news on either the Red Sea shipping or Russian Refining attacks this morning, so Cocoa prices seem to be taking over the commodity headlines while energy markets wait on their next big move.

RBOB gasoline futures set a new 6-month high Monday at $2.7711, which leaves the door open on the weekly charts for the spring rally to continue. A run at the $3 mark is certainly possible in the next few weeks before the typical seasonal price peak is set just before the start of driving season.

A container ship lost power and crashed into the Francis Scott Key bridge in Baltimore this morning, causing a devastating collapse. While cargo shipping into the area will no doubt be impacted by this event, fuel supplies are unlikely to see any notable change since the 9 fuel terminals in Baltimore are primarily supplied by Colonial pipeline. Barges from Philadelphia refineries do supplement Baltimore supplies at times, and those vessel flows will be impacted at least until rescue operations are completed and the bridge sections removed from the waterway. That said, since shipping up from the Gulf Coast via Colonial is generally cheaper than shipping an NY Harbor-priced barrel south, the amount of supply disrupted by this event will be minimal.

While we’re still waiting on the official forecasts for the Atlantic Hurricane season, early reports continue to suggest that we could be in for a very busy year due to warm water temperatures and a forming La Nina pattern.

Dallas meanwhile is preparing for a different sort of disruption, with city officials encouraging companies to let employees work from home during the solar eclipse on April 8th as metroplex traffic is expected to surge. While some isolated fuel outages are certainly possible if people start panic buying gasoline they don’t need, there’s no reason to expect any widespread impact from the demand spike.

Today’s interesting read: Why AI requires a staggering amount of electricity and may create supply competition for EVs that will end up benefitting fossil fuels.

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