Energy Market Updates

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Inventory Draws

Inventory Shocker Reverses the RBOB Slide

Line charts depicting the stock market scattered on a table

A continuing poor outlook on gasoline demand and (presumably) increasing stockpiles continued to push RBOB futures down this week -  that is until it took an abrupt about face today on a shocker of an inventory report. Analysts were predicting a build of around 300,000 barrels but - surprise! - the report showed a draw of over 4 MILLION! 

ULSD settled up as well  - analysts had predicted a 900,000 barrel build and instead we saw a 1.8 million barrel drop. 

If you were stuck to the screen today, we saw NYMEX react to the panic, with gas going up over 5 cents and ULSD up over 3 breifly, before both backed down some. At the close, gas settled up .0242 to 2.7397, and ULSD closed out up .0292 to 2.8761. 

Prior to today prices were looking to go the right way - Monday saw CRUDE futures hit a 6 month low. The month of July saw WTI fall by over 6%, which is the biggest drop we have seen in more than 2 years. Prices had hit a high of 104.59 on fears over Russian supply (export) disruption after the MH17 flight crashed in Ukraine, but have backed off since those fears haven’t come to fruition. 

Earlier this week additional seemingly positive economic indicators also pushed the dollar up, which often causes a drawback in commodity pricing - which we saw happening until today's inventory numbers were released. 

Reports indicated strong growth in the manufacturing  and service sectors, with the Commerce Department pegging manufactured goods orders and durable goods orders both up over 1%.  All of these are good signs (in theory at least) that the economy is continuing to strengthen, particularly given that the positive numbers surpassed projected expectations.  

Hopefully given the generally positive economic data for the week, traders adjust to the inventory shock quickly and we'll see a correction over the next few days. 

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Surprise CRUDE Inventory Drops Catch Analysts Off Guard - but NYMEX Holds on to Week's Losses

Line charts depicting the stock market scattered on a table

The EIA Inventory data out today showed that US Crude stocks unexpectedly fell 2.38 million barrels last week - if you remember, earlier this week, analysts were expecting roughly that amount of BUILD to be reported. Gulf Coast inventories had been expected to show a huge build but instead dropped by over a million barrels. On the other side, gasoline inventories dropped essentially in line with expectations, falling by a little over 1.5 million barrels. 

So what happened on Crude?

Consensus seems to be the main factor was the Houston shipping lane closure we discussed last week - the interruption likely caused higher draws than anticipated, primarily because it impacted imports to the Gulf during the shutdown, forcing refineries to pull off existing stock. This makes sense, as we saw a much larger reversal in inventory actuals versus expectations in the Gulf Coast region than generally.   

Despite the surprise inventory numbers, NYMEX futures are still trending down today. 

Interestingly, RBOB prices continue to trend downwards (although it pulled in mostly by the close) despite sustained and growing issues with ethanol supply, and a dramatic increase in its cost. Bloomberg reports that ethanol climbed 81% over the quarter, so even though RBOB is dropping on the screen, it's very unlikely consumers will see any real relief at the pump any time soon - at least until the supply and logistics issues spiking the price of ethanol subside.  

At the Close - ULSD settled -0.0212 to 2.8666, RBOB settled -0.0029 to 2.8668, and CRUDE settled out -0.12 to 99.62 

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Distillate Inventories Carry Futures Higher

Last night API's set the early tone for todays rice action as preliminary numbers showed large draws in distillates.  Those numbers were confirmed this morning with the EIA releasing a staggering 4.8mbl draw in distillates vs expectations of a mere 700k.  Gasoline was down slightly at 345k and Crude showed a slight build at 375k bls.  On the surface it appears distillate demand is on the rise, not only in the US, but also from an export position.  Soon after the data released, pits jumped almost .04, and stayed in that range for most of the afternoon.  Supporting the bullish price action was FED meeting minutes which appear to confirm last weeks chatter that we will start to see some significant unwinding of the Bond buying program in the months to come, as well as a positive retail report for October.  The hope is that a positive October doesn't turn into a lackluster November and December which is often the case in the retail world.  News hit mid afternoon of US-Iranian talks ended almost as quickly as it started, one report said the talks lasted less than 10 minutes with few words spoken.  Even with the draw in distillates, the market appears to be well supplied as Crude actual lost .01 to close out at $93.33, RBOB added .0235 to $2.6630 and HO led the gainers settling up .0487 to $2.9545.  Again, well within its comfort zone.

RBOB Close
                      CLOSE     CHANGE            
DEC   2.6630         +.0235
JAN   2.6458         +.0259
FEB    2.6483        +.0257
MAR    2.6609         +.0253
APR    2.8241         +.0239
           MAY   2.8209         +.0227         
HEAT Close
      CLOSE            CHANGE
DEC   2.9545    +.0487
JAN   2.9528     +.0464
     FEB    2.9503     +.0431   
 MAR   2.9449     +.0397
APR   2.9355    +.0361
 MAY   2.9267    +.0327
 

 

 

Line graph

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Flat Demand and Gasoline draw push NYMEX

When the always suspect API's were released last night at around 4:30pm,  I couldn't contain myself when I saw the massive 5.2mbl draw announced for gasolines.  By in large, estimates were that we were only to expect a 1.2mbl draw down in stocks.  Obviously overnight markets reacted strongly to the pending news pumping up values almost .06 on all products ahead of the 10:30 announcement of today's DOE numbers.  And to much of my chagrin,  the inventory report confirmed the API gasoline read as a 3.5mbl draw was announced in gasolines.  Yet Crude showed a large 4.2mbl build vs estimates of a 500k draw and distillates grew by 2.5mbl while expectations were for only a 500k barrel increase.  While the draw in gas can be explained by a seasonal switch over, on relatively flat demand, it is difficult to explain away the builds in Crude and distillates.  Unfortunately the Market has a way of making its own reality and could never gather enough momentum to sell off hard enough to turn negative today.  Values still appear to be on the high end of the range as the HEAT low of 2.70 a few weeks ago may have been the seasonal low.  We have now added about 20 cents in value over the last five sessions.  At the close, WTI Crude rose .93 to $87.58, RBOB added .0165 to $2.8703 as outer months were about two cents stronger, and HEAT jumped .0290 to $2.9616.
RBOB CLOSE
                 CLOSE       CHANGE 
  
SEP    28703       +.0165
OCT    27402      +.0386
NOV    27069      +.0409
DEC   26915       +.0411
JAN    26937       +.0407
FEB    27051      +.0400
HEAT CLOSE
          CLOSE    CHANGE
SEP    29616     +0290
OCT   29706      +.0285
NOV    29812      +.0284
DEC   29908     +.0281
JAN   30010       +.0281
FEB   29906       +.0280
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NYMEX rebounds with Bullish Inventories

We continue the "new normal" roller coaster ride as NYMEX values once again turn sharply positive on the the heels of a very bullish Inventory report.  Not helping the cause was the FED announcing yesterday that they will hold rates very low for the next two years.  It was the first such comment that actually put a timeline on Interest rates.  Furthermore, the comments are a complete 180 degree turn in approach from the usually vague board.  With the greenback being pushed lower, Commodities surged higher beginning just after yesterdays close.  DOE numbers showed a staggering 5.2mbl draw in Crude, while most expected a 1.7mbl build.  Gas fell 1.6mbl vs a 700k expected build and distillates drew 737k while analysts expected a build of 1.25mbls.  All this while the DOW continues its own seesaw as our 401k's become 201e's!  Currently down over 300 points, the EIA just recently reported that it sees "significant downside risk" should current financial market concerns become more widespread.  Either way, we are above that magical $2.80 number again on HEAT as it closed up .1005 to $2.8653, RBOB gained .1149 to $2.7825 and CRUDE added $3.59 to $82.89. 
 
heat chart
RBOB CLOSE
                 CLOSE       CHANGE 
  
SEP    27825       +.1149
OCT    26312      +.1104
NOV    26022      +.1074
DEC   25902       +.1046
JAN    25946       +.1043
FEB    26076      +.1038
 
HEAT CLOSE
          CLOSE    CHANGE
SEP    28653     +.1005
OCT   28751      +.0988
NOV    28863      +.0960
DEC   28970     +.0933
JAN   29083       +.0909
FEB   29079       +.0886
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