The streak is broken for energy prices as Wednesday’s early gains failed to hold after the weekly DOE inventory report and prices settled lower for the first time in 7 sessions. Trading has been subdued this morning with most contracts making several trips back and forth past the breakeven mark as the complex seems to be ready to catch its breath for a while as traders start planning for a long weekend.
Tomorrow is Good Friday, one of only 3 holidays all year in which electronic trading for NYMEX and other CME products will be completely shut down. Trading will halt as usual this evening at 5pm Eastern, and then won’t reopen until Sunday night. Spot market assessments will not be done tomorrow, and most energy companies are closing for the day, so most rack prices nationwide will be held from Thursday night through Monday, although the spring RVP transition – traditionally April 15 in many markets – may add a few wrinkles to those plans.
There’s a tendency for traders to be hesitant about going short into a long weekend, and given the rash of geopolitical issues creating uncertainty at the moment, don’t be surprised to see prices melt up a bit this afternoon, especially if volume dries up this morning.
We’ve reached the mid-month data deluge this week, as the EIA released its Short Term Energy Outlook Tuesday, OPEC released its monthly oil report Wednesday, and the IEA released its own monthly oil market report this morning. All of the agencies are commenting that supply & demand for oil is near balanced globally, and that although forecasts still call for demand growth in 2017 worldwide, the pace is slower than last year and the first quarter failed to meet expectations. The other major theme seems to be that non-opec production is climbing this year, in spite of the pledges from OPEC-friendly countries to reduce their output.
Yesterday’s DOE report showed precisely why that non-OPEC supply is increasing, as US Producers brought another 35,000 barrels per day of output on-line last week, and have ramped up by more than 700,000 barrels/day since the output cut rumors started pushing prices higher last fall. That figure alone may be the reason that prices pulled back yesterday in spite of across-the-board declines in US inventories.
Other notable numbers from the report: Diesel demand estimates reached their highest level in almost 10 years last week, driving days of supply for distillates to levels not seen in the past 2 years. Gasoline demand estimates remain in “good, not great” territory, ticking up slightly on the week, and topping year ago levels for a 3rd straight week. The recovery in gasoline demand has helped inventories through their seasonal transition, and have pulled down nicely from record highs, although they remain towards the high end of their seasonal range.
Refinery runs surged higher again last week, and remain on pace to surpass record high levels for the year. Perhaps most notable is that the increase happened even though PADD 3, home to half of the country’s capacity, was actually lower for a second straight week. Speaking of capacity, another 100,000 barrels/day was added to the refining capacity figure last week as plants in the Gulf Coast and Midwest continue to expand their operations, while the East Coast saw a decline of 22,000 barrels/day, which implies that a refinery may have taken a unit off-line for good.