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ULSD Took A Week To Make A Move It Would Have Easily Made In An Hour 2 Years Ago
Energy markets are starting the week moving modestly lower with losses on either side of a penny/gallon for refined products. For ULSD, this would mark a 6th consecutive drop if prices stay negative today, with a total decline of 13 cents during that stretch, 11 cents last Monday/Tuesday and just 2 cents in the past 4 sessions. Another way to look at this, ULSD took a week to make a move it would have easily made in an hour 2 years ago.
While several analysts are suggesting the stock market may get a short term boost from the failed assassination attempt over the weekend, energy markets may be seeing a very minor reaction in the other direction as a Republican president would be more friendly to the industry, thereby allowing incremental supply to reach the market, which lowers prices and is actually bad in the short term for producers.
Hedge funds had mixed activity last week, adding modest amounts of length (bets on higher prices) in WTI, Brent and RBOB via a combination of new longs and some short covering, while the diesel contracts (ULSD and Gasoil) both saw modest reductions. WTI is seeing the most bets on higher prices from large speculators than we’ve seen all year, although it’s well below historical highs, and ULSD has stayed in net short territory for 6 straight weeks.
Baker Hughes reported a net decline of 1 oil rig and 1 natural gas rig active in the US last week, bringing the totals for both to fresh multi-year lows.
Total’s 200mb/day Pt Arthur TX refinery was taken offline Saturday due to a loss of steam, and the company expects flaring to be ongoing throughout the week as they attempt to bring the facility back online. There have not been any other refinery filings to the TCEQ the past 3-4 days, suggesting the restarts after Beryl moved through a week ago are progressing well.
Click here to download a PDF of today's TACenergy Market Talk.
Falling Gas Prices Have Not Been Good News For US Refiners
Refined products are attempting to find a floor after dropping by more than a dime in the first three days of the week. RBOB futures are trading modestly higher for a 2nd straight day, while ULSD futures are set to snap a 4-day losing streak.
Yesterday’s CPI report brought the first negative inflation reading for a month in 4 years, with lower gasoline prices the main contributor to the decrease. Stock market investors had mixed reactions to the report as the tech bubble looks like it may be starting to burst.
Falling gas prices have not been good news for US refiners that are seeing margins slide close to break-even levels at the time of the year that often brings their best profits. Crack spreads have recovered marginally in the past week but will still be cause for concern as summer starts to wind down.
Russian officials are recommending another ban on most gasoline exports as ongoing attacks by Ukrainian drones, and the upcoming peak demand season are creating concerns over domestic shortages.
Marathon was reportedly attempting restart at its Galveston Bay (FKA Texas City) refinery Thursday after Hurricane Beryl knocked out power to the facility and once again exposed weaknesses in the state’s power grid. A report Wednesday from the Dallas Fed discusses the challenges in meeting the state and country’s growing demand for electricity.
While Hurricanes are the most talked about threat to refineries, heat waves are becoming more of a concern, particularly in Europe as facilities are struggling to maintain steady rates as temperatures rise.
Click here to download a PDF of today's TACenergy Market Talk.
Refined Product Futures Prices Are Climbing Slightly Higher This Morning, Trying To Turn Today Into Reversal Thursday
Refined product futures prices are climbing slightly higher this morning, trying to turn today into Reversal Thursday and snapping this week’s downward trend. Diesel futures are leading the way higher, gaining 2+ cents to start the day while gasoline follows close behind, trading 1.5 cents over yesterday’s settlement.
The International Energy Agency published their monthly Oil Market Report early this morning, this week’s latest report from the industry’s sundry data reporting organizations affectionately known as Alphabet Soup. The IEA trimmed its oil demand growth forecast citing, generally, slowing global economic activity and, specifically, a decline in Chinese oil consumption. The Agency expands on the latter, attributing its lower demand expectations to factors like the looming real estate crisis in China and the country’s shift towards electric vehicles.
Power has been restored to the section of the Explorer Pipeline going from Houston to Greenville (North Texas) after being knocked offline Monday morning. Group 3 ULSD physical prices reacted promptly to the news yesterday, trading down to 14 cents below the screen. Outages persist in the Houston area where millions are still without power. Tracking said outages is, apparently, difficult for power providers, forcing some Texans to turn to a sacred regional chain for real-time information, adding to the host of reasons for it being the hometown favorite.
The Bureau of Labor Statistics came out with their monthly update on the status of inflation in the US, reporting that it slowed more than expected in June, dropping to 3% annually. While this may lead to the possibility of a rate cut in the near(ish) future, BLS also noted that the third consecutive month of higher unemployment could serve as harbinger for that nasty ‘R’ word.
Four days after making landfall on the US coast, the remnants of hurricane Beryl are still causing headaches, this time brining heavy rains and flooding to the North East. With pipeline outages and minimal refinery hiccups behind us, it looks like energy infrastructure is in the clear, for now, but the sudden appearance of tropical activity off the southern Atlantic Seaboard proves a stark reminder that there is more to come before the season is out.
Energy Futures Prices Are Down Again For The Fourth Consecutive Trading Session This Morning
Energy futures prices are down again for the fourth consecutive trading session this morning with the prompt month gasoline contract leading the way lower, currently trading ~1.5 cents below yesterday’s settlement. Heating and crude oil futures are drifting just on the red side of unchanged.
Unsure where crude oil prices are going for the next couple years? Don’t worry, the government is here to help. The EIA is estimating oil prices to be somewhere between $40 and $120 per barrel by 2026, as published yesterday in their Short Term Energy Outlook. While the usefulness of that estimate can be debated at length, some might rather turn their attention to the anticipated drop in disposable income spending on gasoline for 2024 and 2025.
OPEC published their monthly report this morning, highlighting their optimism for crude oil demand growth in 2024. Along with strong general economic growth, the cartel cites easing global inflation and an increase in travel for its sunny outlook on oil demand.
The American Petroleum Institute published their national inventory report yesterday afternoon, estimating a ~2 million barrel draw in crude oil stockpiles last week. Gasoline inventories are also down around 3 million barrels week over week, despite weak demand concerns. The Department of Energy will publish their official report at its regular time (9:30 CDT) this morning.
Colorado State University updated their 2024 hurricane forecast yesterday, bumping the number of anticipated named storms from 23 to 25 for the season. Every major metric CSU is forecasting (number named storms, hurricanes, major hurricanes, etc) is nearly double the observed 30-year average.
A Beryl-induced power outage knocked a portion of the Explorer pipeline offline early this week and has persisted through this morning. The section of pipeline running from Houston to Greenville TX will remain dormant until power is restored in the Pasadena area.
Click here to download a PDF of today's TACenergy Market Talk.
Marathon’s Galveston Bay Refinery Was The Only Major Plant To Suffer A Significant Disruption Due To Hurricane Beryl
ULSD futures prices are leading the way lower this morning, trading 1% lower than yesterday’s settlement so far this morning. The prompt month crude oil and gasoline contracts are following suit, with more a tempered ~.5% move to the downside to start the day.
Marathon’s Galveston Bay refinery was the only major plant to suffer a significant disruption due to Hurricane Beryl yesterday. The 665mbd refinery has since restarted after briefly lost power (along with 2.7 million residents) as the category 1 storm made landfall and drenched the Texas coastline. The storm made landfall closest to Phillips66 Sweeny refinery (240mbd), which continued normal operations throughout.
The remnants of Beryl are forecasted to continue moving northeast across the Midwest region, dropping 2-4in of rain on St. Louis, Indianapolis, Chicago, and upstate New York. As of now there are no systems showing the potential for cyclonic development over the next week.
The Commitment of Traders report showed an increase in money manager confidence around heating and crude (American & European) oil futures as the smart money trimmed shorts and added new long positions for all three last week. Gasoline, and it’s long lost distillate cousin gasoil, both saw a decrease in their net managed positions last week as the speculative money piles on their short bets, banking lower prices amid low seasonal demand.
Click here to download a PDF of today's TACenergy Market Talk.