Prices Tick Higher Ahead Of Virtual Meeting

Market TalkThursday, Apr 9 2020
Energy Prices Set All Sorts Of Records

Prices are ticking higher ahead of the virtual meeting among OPEC and its former allied nations that’s scheduled to start at 9 a.m. central. As the rumors from that meeting start to trickle out, don’t be surprised to see some extremely choppy action as the results of this meeting could be the difference between oil dropping below $20 and rallying back above $40.

While Russia may still be the lynchpin in any OPEC & Friends oil output cut deal, the country is having to consider banning gasoline imports from its European neighbors that are threatening their domestic refinery production. That scenario sheds light on a harsh reality facing oil producers these days. Even if the OPEC alliance cuts production by 15 million barrels/day, that is not enough to offset the drop in demand until the shelter in place orders are removed.

How crazy is the rush for storage becoming? As the traditional tankage on shore, at sea and in rail cars is quickly gobbled up, there’s now a suggestion we could see oil in bags just like your favorite boxed wine. Based on the DOE’s latest weekly data, the U.S. could handle four more weeks of the recent 13-15 million barrel/week increases in oil inventories before reaching the all-time highs set in 2017, and the SPR storage opening could offer another three to six weeks’ worth of room, although logistical bottlenecks will limit what is able to be stored.

Is the bearish sentiment coming to an end? U.S. gasoline stocks rose by 10.5 million barrels last week according to the DOE’s weekly report – the second largest increase on record - and yet gasoline futures ended the day with solid gains. Buyers may be encouraged by gasoline output dropping to keep pace with the fall in demand, but cash markets still aren’t showing that optimism with multiple regional grades still trading 40 cents or more below futures, forcing rack prices in a few distressed markets to drop below 10 cents/gallon Wednesday.

U.S. refinery runs have dropped to levels not seen since Hurricane Harvey knocked more than 20 percent of domestic capacity offline 2.5 years ago. The difference this time is instead of seeing cars lined up for blocks in a rush to fill up, we’re seeing retail gasoline below $1/gallon in more markets daily and empty pumps.

Weekly jobless claims in the U.S. were reported at 6.6 million last week, bringing the three week total north of 16 million since stay at home orders became widespread, dwarfing anything we’ve seen before.

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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.