Refined Products Futures Drifting Higher

Refined products futures are drifting higher this morning after the API reported inventory draws in their weekly data release published yesterday afternoon. Gasoline and diesel stocks were reported to have dropped 1.1 and 2 million barrels respectively. WTI futures are trading positive this morning in sympathy despite recording a 2 million barrel build. Confirmation from the weekly EIA release at 9:30 AM CT will likely dictate the remainder of today’s trading activity.

Armed protesters in Libya have caused the shutdown of a 250,000 barrel per day pipeline. While that may sound like a rather volatile situation to us, this hardly makes for headline news oversees. The European benchmark Brent crude futures are up only 20 cents so far today.

For now WTI’s triple bottom at around $47 has held after being placed on Monday. HO is set to test its 20 day moving average today, and settling above that level could help legitimize this rally that has seemed to be brewing for the last couple weeks. A substantial inventory draw in gasoline stocks is almost necessary, at this point, to coax the traditional “Spring Rally” that has been absent so far this year.

CLICK HERE for a PDF of today’s chart

Market Update (8)

Energy Markets on the Move Higher

Energy markets are on the move higher this morning after equity and commodity markets around the world recovered nicely from a bit of panic selling to start the week.

WTI survived its 3rd attempt to break $47 in the past 2 weeks, and once again bounced by more than a dollar.  There’s an old adage for chart watchers that “there’s no such thing as a triple bottom” that is now being tested as a result.  The results of that test will be the difference between crude oil at $44 and $50 over the next few weeks.  The first layer of resistance to the upside now that we’re moving higher looks to be last week’s highs of $48.74.

ULSD prices have been following crude closely, trading down to the mid $1.47 range for a third time yesterday before rallying more than 4 cents.  There’s a strong chance of diesel prices reaching the $1.30s if that support breaks, otherwise it looks like we could go back to the $1.60s in short order if this bounce  is sustained.

RBOB gasoline prices are leading the move higher again as they did yesterday in what appears to be an attempt to make up for the lack of a spring price rally.  The transition from winter to summer gasoline grades is in full swing around the country, which is helping to wipe out the record inventory levels we saw over the winter.  Refinery runs are expected to move higher over the next few weeks as plants come out of spring maintenance which may give some headwinds to the push higher in products.

Inventory reports will take center stage the next day and a half with the APIs out this afternoon and the DOE reports out tomorrow morning.  Estimates are for crude oil inventories to peak out in the next week or two before those increased refinery runs start drawing on those stocks.  Gasoline demand and crude oil output have been market moving numbers of late along with the relatively new weekly estimates of export activity.

CLICK HERE for a PDF of today’s charts

Market Update (8)Presentation1_Page_1Presentation1_Page_2Presentation1_Page_3

Energy Prices Approaching 4-month Lows this Morning

Energy prices are approaching 4-month lows this morning after the weekend meeting among oil producers failed to produce, and as equity markets around the world react negatively to Friday’s failure of the new US Healthcare proposal.   If we see the March lows set last week break, and hold, we should see another $2-3 come out of oil prices this week, and around 10 cents of downside for refined products.  If that support holds however, it’s likely we’ll see an attempt to take WTI back north of $50.

The weekend meeting in Kuwait between OPEC and friends came away with little progress.  Early reports suggested the group ended the meeting by recommending to extend output cuts for another 6 months.  A later statement clarified that the group had simply agreed to review whether or not that extension should be considered.  The fact that they couldn’t even agree to recommend something seems to have driven the overnight slide in oil prices.  Total compliance with the current agreement was reported to be at 94%, but the non-OPEC producers have only made 2/3 of their promised cuts, suggesting that Russia is not yet living up to its end of the deal.  Shocking.

The managed money net long position held in WTI and Brent had small declines last week, once again led by new bets on lower prices rather than liquidating bets on higher prices.  The ability for the record amount of length to weather the storm of selling the past 2 weeks may offer support to the theory that some of these funds are coming over from other asset classes to diversify away from record high stock prices.  The question remains if those funds will stay in the market long term – the idea of a “massive passive” bid in oil stocks has been around ever since energy ETF’s became popular – or if they’ll head for greener pastures now that we’re testing 4 month lows.

21 more oil rigs were put to work last week according to Baker Hughes, doubling the average weekly rate of increase so far in 2017.  Due to the lead time involved, a slowdown in the rig count due to the recent sell-off in oil prices may not appear for several more weeks. If prices continue to hold above the $47 support area, the bigger question is whether or not we’ll see rig counts decline at all.

CLICK HERE for a PDF of today’s charts

Market Update (8)Presentation1_Page_1Presentation1_Page_2Presentation1_Page_3Presentation1_Page_4Presentation1_Page_5Presentation1_Page_6Presentation1_Page_7Presentation1_Page_8

Energy Prices Treading Water

The action in energy markets stalled out in the back half of the week as prices have been treading water for the past two days.  Crude oil and diesel prices briefly touched fresh lows for the year Wednesday morning, but now seem to be holding steady as all eyes turn to an OPEC meeting over the weekend.

The two big questions for that meeting are how compliance with the cartel’s production cut plan is holding up, and whether or not they will announce an extension to that plan that’s set to expire at the end of June.  Many analysts are predicting that they group will extend the cuts to try and prop up prices, although recent data has shown that production cuts and export activity don’t always move hand in hand.

Uncertainty over the health care vote is garnering plenty of headlines, and while there is no direct connection to that story and petroleum futures, it has certainly roiled equity markets this week and could be contributing to the wait and see attitude that’s taken over the energy markets as well.

The EIA’s Prime Supplier report released earlier this week confirmed what most of the industry felt, that January was a brutal month for gasoline demand. The report estimates that gasoline sales dropped nearly 7% nationwide from December, and the largest consuming region PADD 1 was down more than 8% for the month.  The good news for suppliers is that weekly demand estimates have recovered nicely in the past 5-6 weeks, although most indicators suggest demand will remain lower than 2016 – largely due to retail prices being some 30 cents higher than a year ago.

The state department issued a border crossing permit for the Keystone XL pipeline this morning.  That project has been delayed nearly 8 years due by the previous administration, and should give the protesters who were recently vacated from the Dakota Access pipeline project something to do this spring.

After ticking higher for a few days when oil finally broke out of its trading range, volatility has dropped again for oil prices, but has been creeping higher in equities, which makes this period of consolidation feel a little like the calm before a storm.

CLICK HERE for a PDF of today’s charts

Market Update (8)Presentation1_Page_1Presentation1_Page_2

Volatile Day for Energy Prices

It’s been a volatile day for energy prices already, following an impressive bounce in Wednesday’s session after crude oil and diesel prices reached their lowest levels of the year a few minutes after the DOE report.  WTI rallied nearly $1.5 after reaching a low of $47.01 yesterday, and leaving behind what could be a double bottom with last week’s low trade at $47.09 that precluded a $2.5 rally to end the week.   ULSD has a similar pattern after reaching its low trade of the year at $1.47 then bouncing back north of $1.50.

Headlines were already out this morning touting draws in refined product inventory stocks as the reason for the overnight rally, but they may have to be re-written as the overnight gains have turned into losses.    This choppy action sets up for a volatile finish to the week, with a risk of a slide to $44 for WTI if yesterday’s floor fails to hold, and a run back to $50 certainly likely if it does.

Crude oil inventories set a new record high last week, led by a build in PADD 2.  Seasonally we often see crude inventories continuing to build this time of year until increased refinery runs start drawing them down sometime in April.  US Crude production was up another 20,000 barrels/day, slowly but surely making a push towards 2015 levels, although as the WSJ points out this morning, rising sand prices may threaten the recovery in fracking activity.  Watch those PADD 2 inventories in future weeks to see how the Syncrude Canadian unit shut due to a fire will impact regional inventories.

Product demand estimates are good not great.  Gasoline demand was down slightly on the week at 9.2 million barrels/day, down nearly 300,000 barrels/day from this time last year, but nearly 1.2 million barrels higher than the weekly estimate 2 months ago.

Refinery run rates are also cranking back up after a busy spring maintenance season.  Despite several issues last week, including the fire at LyondellBasell, PADD 3 run rates were up nearly 200,000 barrels on the week, and should continue to build throughout the spring.

CLICK HERE for a PDF of today’s charts

Market Update (8)_Page_01Market Update (8)_Page_02Market Update (8)_Page_03Market Update (8)_Page_04Market Update (8)_Page_05Market Update (8)_Page_06Market Update (8)_Page_07Market Update (8)_Page_08Market Update (8)_Page_09Market Update (8)_Page_10Market Update (8)_Page_11Market Update (8)_Page_12Market Update (8)_Page_13Market Update (8)_Page_14Market Update (8)_Page_15Market Update (8)_Page_16Market Update (8)_Page_17Market Update (8)_Page_18Market Update (8)_Page_19Market Update (8)_Page_20Market Update (8)_Page_21Market Update (8)_Page_22Market Update (8)_Page_23Market Update (8)_Page_24Market Update (8)_Page_25Market Update (8)_Page_26Market Update (8)_Page_27Market Update (8)_Page_28Market Update (8)_Page_29Market Update (8)_Page_30Market Update (8)_Page_31Market Update (8)_Page_32Market Update (8)_Page_33Market Update (8)_Page_34Market Update (8)_Page_35Market Update (8)_Page_36