Upward Trend Intact For Oil And Diesel Prices

Market TalkFriday, Dec 4 2020
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Oil and diesel prices are trading at eight month highs this morning, after chart support held earlier in the week, keeping the upward trend intact. Global equity prices were moving higher overnight, as the U.S. looks closer to passing a new stimulus package, which seems to be outweighing the concerns of COVID counts reaching new record highs.  Gasoline prices aren’t far behind, but have not yet broken their November highs as there are more signs of demand destruction both due to normal seasonal factors, and stay-at-home orders.

The bounce this week (assuming prices don’t reverse lower later today) leaves the door open on the weekly charts for WTI to make a run at $50 before year end, which should add another 10-12 cents on refined product prices if that rally materializes. 

A new deal: OPEC & friends made a new agreement this week that will allow for a gradual increase in oil production in 2021, but on a smaller and slower scale than what had been previously rumored. The deal also limits the timeline on producers who need to make up for previous failures to limit their production to agreed-upon levels, which could keep actual output lower for longer. 

D4 RIN values surged to a new multi-year high yesterday as soybean prices rallied following a recent pullback. Ethanol RINs were also rallying, but have not yet made it back to the $.70 mark they hit a few weeks ago. The EPA let their statutory deadline pass without releasing a final renewable volume obligation for 2021 (something that was common prior to 2017) which suggests those targets could be set by the new administration’s appointees who will presumably be less friendly to refiners. 

The rally in D4 RINs is helping the value of Renewable Diesel (which receives 1.7 RINs for every gallon blended vs 1.5 for biodiesel). A NYT article yesterday highlighted why RD is becoming the new big thing for US refiners, while also discussing how it remains dependent on government incentive programs, and the risks of a feedstock shortage in the coming years.

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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.