Oil Prices Rally After U.S. President Tweets His High Hopes

Market TalkFriday, Apr 3 2020
Energy Prices Set All Sorts Of Records

Oil prices rallied 25 percent in less than 40 minutes Thursday, after the U.S. president tweeted his hope that Saudi Arabia and Russia might come to an agreement on an output cut.

Despite the fact that the Saudi’s have subsequently made it clear that they will only cut if other producing nations join in the effort (including the U.S.) and the fact that a 15 million barrel output cut would only cover half of the drop in global oil demand, petroleum prices around the world are trading sharply higher for a second day.

Prices are also aided by the Department of Energy announcement Thursday, announcing that it is opening up the SPR for lease to struggling U.S. producers that are quickly running out of storage space. There’s a total capacity available of roughly 77 million barrels, which would accommodate roughly six days’ worth of total U.S. output, or six weeks of the record-setting inventory build we just witnessed.

The record rally following the worst month on record for oil prices has temporarily halted talk of negative oil prices; although, they did already happen on a very limited basis, with Wyoming sour trading below zero earlier this week. The more important part of that article is not that the values went negative, it’s that the negative values are a sign of a functioning market whereas some other markets are beginning to halt trading altogether.

The March payroll report just released showed a drop of 701,000 jobs in the U.S. last month, with unemployment rates jumping by nearly one percent for the headline rate, and 1.7 percent for the U6 unemployment rate. While those figures are a huge negative divergence change from the prior decade, they are also just the tip of the iceberg as most of the virus-impact was felt in just the last two weeks of the month.

Two weeks ago, the all-time official record for weekly jobless claims in the U.S. was around 700,000. Last week’s report smashed that record, with 3.3 Americans filing for unemployment benefits,. That figure was doubled again yesterday, with 6.6 million new filings reported in the past seven days, wiping out the previous four years’ worth of gains.

While the short term price action may be driven by the headlines, longer term prices may well be decided by how quickly we can get those people back to work.

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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.