Gasoline Futures Up Since Tuesday's Settlement

Market TalkThursday, Apr 23 2020
Output Cut Plan Announced

Gasoline futures are up more than 20 cents since Tuesday’s settlement, even as inventories reached a new all-time high last week, amidst signs that domestic consumption has bottomed out and refinery cut backs are keeping inventories from reaching critical levels. Diesel prices are lagging behind in the rally, only up about a nickel during that span.

While diesel demand didn’t fall nearly as much as gasoline over the past month, it saw a healthy increase in last week’s estimate. Diesel inventories continue to rise at a rapid pace due to refinery output holding steady, and exports backing up into the U.S., accounting for five million barrels of the seven million barrel build reported by the DOE.

Cash markets around the U.S. are seeing similar divergence, as gasoline basis values strengthen. Distillates are facing steady selling pressure, pushing Chicago and LA spot markets to record-low levels.

The CME Group (parent company of the NYMEX) chairman said its market for WTI futures “worked to perfection” this week in an interview, and gave a reminder that the exchange is not for average retail investors. That’s a lesson many are finding out the hard way, as the ETF that tried to make WTI available to retail investors is on the verge of an implosion.

The CFTC announced it was investigating the potential for insider trading surrounding the Russia/Saudi price war announcements in March. It doesn’t appear that had anything to do with the volatility this week, but it does shed light on some of the shadier influences the market is dealing with daily.

The EIA this morning published a closer look at the demand drop for petroleum products over the past month, noting that continued demand for distribution of supplies and home deliveries is likely the main contributor to the relative strength in diesel demand.

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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.