Promise Of Big Changes

Market TalkWednesday, Jan 20 2021
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Petroleum futures are moving modestly higher for a second day as the U.S. prepares to transfer power, with a promise of big changes coming soon, but little detail as to what exactly that means. The big 4 energy futures contracts are holding their bullish trend lines, but still have some work to do to break above the high water mark set last week. 

Janet Yellen’s testimony during her confirmation hearing Tuesday seemed to provide a spark to energy and equity markets as she made it very clear that the plan was to “act big” with stimulus packages. The expected spending spree also put the U.S. dollar back under pressure after a two week bounce. While the dollar/oil correlation has weakened in recent weeks, as long as markets are focused on money printing (aka stimulus), expect to hear more about that relationship as a daily factor in price movements.

While most of the U.S. focus is on domestic changes, there’s plenty of activity to keep an eye on in the Middle East. Iran is trying to make noise again, apparently trying to pressure the new administration by increasing military exercises while hurling the equivalent of a schoolyard insult by issuing sanctions against the outgoing administration. Meanwhile an explosion and fire hit seven oil tankers in Syria, and it’s unknown at this time what caused that blast. It’s amazing to think that just over a year ago, U.S./Iranian tensions had analysts calling for $100 oil.

The API Inventory report is due out this afternoon, but the EIA report has a rare two-day delay due to the MLK day holiday and the inauguration, and won’t be released until Friday.

The EPA issued a statement Tuesday night that read:

At 7 PM today (EST), January 19, 2021 EPA will provide decisions to some small refineries that have petitioned the agency for RFS small refinery exemptions. At the same time, EPA will update the Renewable Fuel Standard Small Refinery Exemption website (https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rfs-small-refinery-exemptions) to reflect that information.

As of 7:30 a.m. Central on January 20, that website still showed 45 pending petitions for the 2019 and 2020 compliance years, and it appears that the outgoing EPA only approved two petitions for 2019 and one for 2018, apparently leaving the rest to be reviewed by the new administration. RINs look to be bid slightly stronger to start the day following that (lack of) news.

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

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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.