After a rollercoaster Tuesday session, most energy futures are trying to push higher this morning as we await the weekly inventory report from the DOE.
This time yesterday refined products were dragging crude lower, and in the early going it appeared there may be enough momentum to break through chart support and create the next tidal wave of selling. It was not to be however as prices reversed course mid-day, with several contracts climbing all the way back into positive territory before stumbling lower into the close.
The timing of the Tuesday price swings suggests perhaps there was an early knee jerk reaction to reports that the Shell Pernis refinery – Europe’s largest – was restarting units that had been shuttered by a fire last week, which helped spark heavy buying in several markets. Once the details trickled in that only 1 unit was beginning restart, and that it would still be weeks until the plan was fully operational again, the early sell-off in futures quickly reversed course.
US Equity markets finally saw a small pullback Tuesday as concerns over the escalation in tensions with North Korea snapped a string of record setting days for the DJIA. As has been the case for most of the past year, energy prices seem to largely ignore the move in stocks, content to go their own way for now.
After a 10 cycle hiatus, Colonial pipeline announced it would be allocating its main gasoline line again yesterday. There was much discussion following the announcement about whether the move was due to a lack of gasoline exports from the gulf coast, or a backing out of imports on the East Coast due to the refinery issues in Europe. The cash markets have not shown much change in the spreads between Gulf Coast and NYH pricing recently, and linespace values are still negative, so it appears for now that the reality of the Colonial line being the key artery to deliver gasoline from the largest producing region to the largest consuming region in the country is just sinking in.
Late Tuesday afternoon the API was said to report a 7.8 million barrel decline in crude oil stocks, and a small draw of 157,000 barrels of diesel, while gasoline inventories grew by 1.5 million on the week. Perhaps more notably for gasoline prices, PADD 1 inventories were estimated to have built by more than 3 million barrels on the week, which explains why the September RBOB contract is the only one in the entire complex still trading in the red this morning. The DOE’s weekly report is due out at 9:30 central.
While tropical storm Franklin has been battering Mexico the past 2 days, the system known as 99L continues to puzzle forecasters as it slowly approaches the US. Forecasts now suggest there’s a potential threat to the SE coast of the US early next week, although the path and strength of this system remain unclear. At this point there does not appear to be a threat to energy infrastructure. Conditions remain favorable for more storm development in the Atlantic over the next few weeks.