Rally In Energy Prices Has Resumed

Market TalkThursday, Sep 27 2018
Rally In Energy Prices Has Resumed

After a 1-day break, the rally in energy prices has resumed Thursday with Brent crude back above $82, and ULSD futures reaching their highest since February 2015. Concerns over Iranian sanctions continue to take most of the blame in headlines for the move higher while some bearish data points in Wednesday’s DOE report have quickly become yesterday’s news.

US Crude inventories built modestly as US production reached a record high at 11.1 million barrels/day. That production figure is 1.5 million barrels/day more than what the US was producing at this time last year.

Refinery runs dropped by more than 5% on the week, led by a dramatic drop in PADD 2 (Midwest) runs of nearly ½ million barrels/day as a busy fall maintenance season appears to be coming to fruition. Several reports over the past year suggest that we may see more refinery maintenance than normal in the next year as plants prepare for the spec change in Marine diesel starting in 2020.

Total petroleum demand saw another large slump last week as the DOE’s estimate for gasoline fell by more than ½ million barrels/day last week, dropping below 9 million barrels/day for the first time since May.

As expected, the FOMC raised interest rates for a 3rd time this year, and suggested it would stick with its plan to raise rates a 4th time in December. Equity markets initially rallied as the statement omitted a sentence from previous meetings that suggested the FED was looking more dovish on rates, but that optimism was short lived as US stocks sold off heavily into the close.

In other news, Energy Secretary Rick Perry said yesterday that the US is not considering a release of the SPR to offset the impact of sanctions on Iran.

Nearly 5.5 years after the FBI raid that shocked the industry, the former president of PFJ was sentenced to more than 12 years in prison for his role in a scheme to defraud customers.

CLICK HERE for a PDF of today's charts

News & Views

View All
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.