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11-26-2021 Daily Market Comments

6301 Ralston Road – Arvada, CO 80002

Bryant Gimlin, Energy Risk Manager ~ Office: (303) 350-3757 Cell: (970) 590-8782

Daily Market Comments for: For Friday, November 26, 2021

Date

Crude Oil

Diesel

RBOB

Natural Gas

11/18/2021

$79.01 Z21

$2.3840 Z21

$2.2943 Z21

$4.9020 Z21

11/19/2021

$76.10 Z21

$2.2934 Z21

$2.2119 Z21

$5.0650 Z21

11/22/2021

$76.75 F22

$2.3254 Z21

$2.2602 Z21

$4.7890 Z21

11/23/2021

$78.50 F22

$2.3843 Z21

$2.3372 Z21

$4.9670 Z21

11/24/2021

$78.39 F22

$2.3830 Z21

$2.3197 Z21

$5.0680 Z21

In the News:  The energy complex did a lot of nothing in a very lackluster Wednesday session despite Biden’s big SPR release and weekly DOE inventory data. Biden released 50 million barrels from the US Strategic Petroleum Reserve, comprised of 32 million sour Crude (high sulfur content) as a swap for delivery in the first 4 months of 2022– this means that oil companies would take the oil then and must replace more than they take – returning the oil between July and September 2022 and returning between 2.3% and 9.1% more than they took out, depending on the time frame it is replaced.  Since the release is for sour Crude, it is not nearly as in demand from refiners because it requires extra refining and the addition of natural gas which has doubled in price, so thoughts are much of this might go for export.  The remaining 18 million comes from a sale of the SPR that was previously approved by Congress for sale between 2022-2025 and the beginning date just moved up. Meanwhile weekly DOE data showed a small build in Crude Oil stocks and small draws in Products. Demand was bullish as over the four most recent weeks compared to the same period last year; Total Petroleum Supplied was 20.7-mbpd, up 7.0%; Gasoline was 9.3-mbpd, up 11.5%; Distillate was 4.2-mbpd, up 3.0%; Jet was up 40.4%. Weekly demand showed Gasoline up 93,000-bpd to 9.334-mbpd; Distillate up 41,000-bpd to 4.391-mbpd. Refinery Utilization was up 0.7%, (as expected) to 88.6% of capacity. Weekly inventory data are summarized below.

DOE Inventory Report Summary - Week Ending -

11/19/2021

   

In millions of barrels

Total Stocks

Change

Production

 

This Week

Last Week

Last Week

Last Year

This Week

Change

Crude Oil

434.0

433.0

1.0

(54.7)

15.6

0.24

Distillate

121.7

123.7

(2.0)

(20.9)

4.8

(0.06)

Gasoline

211.4

212.0

(0.6)

(18.7)

10.1

0.18

       

% Op

88.6%

0.7%

 

Crude Oil Stocks

Distillate Stocks

Gasoline Stocks

 

Change

This Week

Change

This Week

Change

Padd I (East Coast)

8.9

(0.8)

40.2

0.3

53.8

0.0

Padd II (Midwest)

110.8

1.3

26.2

(1.3)

44.3

0.5

Padd III (Gulf)

240.0

(2.6)

40.7

(0.6)

78.7

(0.5)

Padd IV (Rockies)

23.8

0.1

3.4

0.2

7.8

0.2

Padd V (West Coast)

50.6

3.0

11.2

(0.6)

26.9

(0.8)

Total

434.0

1.0

121.7

(2.0)

211.4

(0.6)

Products: Group and Chicago Gasoline basis was across-the-board higher on Wednesday on pre-holiday short covering. Group Gasoline basis settled $0.0025 higher to -$0.1525 while Group Diesel basis ended $0.0075 higher to -$0.0825. Chicago Gasoline basis ended $0.0300 higher to -$0.1200; Chicago Diesel ended $0.0600 higher to -$0.0500. Supply in Denver is starting to tighten. Phillips and DPT have implemented terminal caps on Diesel with the latter cutting daily allocation to 90%. Colorado winter weather coming in may dampen demand, however.

Refined Products held with Crude Oil resulting very little change to NYMEX implied Refinery Margins. The January Gasoline Crack ended $0.41/bbl lower to $16.78/bbl; the January Diesel Crack ended $0.01/bbl lower to $21.54/bbl.

Overnight: Energy futures are plummeting sharply lower this morning on the overnight electronic session on COVID fears. As of 07:30 in the spot months; (Jan) WTI Crude Oil is $5.00 lower to $73.39; (Jan) Brent Crude Oil is $4.81 lower to $77.81; (Dec) Diesel is $0.1499 lower to $2.2341; (Dec) RBOB is $0.1408 lower to $2.1789; (Dec) Natural Gas is up 272 to $5.3400.

Short Term: Equities, commodities, (especially energy), and bond yields are sharply lower in limited liquidity trading following news of a Covid-19 variant that features a highly mutated spike protein that increases transmissibility. It’s too early to know the impacts of this virus, but fear is a strong emotion that quickly translates to market pricing. Energy futures, travel stocks are certainly pricing in lower demand. At today’s low of $71.10/bbl for WTI Crude Oil, we were on pace for the sharpest drop since July 19th. Governments, many of whom are already dealing with high case counts of the Delta variant, will likely impose restrictions on travel to and from other countries. So far, dozens of countries and the EU have placed travel restrictions to and from South Africa, where the new variant was first detected. Cases have been reported in Belgium, Botswana, and Hong Kong. No doubt many other countries will identify cases over the coming weeks.

Regardless of the health impacts of this new variant, its higher transmissibility leads to more chances for future mutations and greater potential harm. Scientists are working to determine whether or not the new variant reduces vaccine effectiveness. Vaccine manufacturers like Pfizer and Moderna are reportedly able to update their vaccines relatively quickly. Pfizer CEO reportedly puts that timeline at around 100 days. However, the rollout and distribution of a new vaccine, if needed, would take a long time. End users should be using this dip to cover 2022. It might not be the low, but it is hard to catch the falling knife and so long as they are using Maximum Price contracts the low is not as critical.

Natural Gas: Natural Gas futures have now become rangebound, trading more on technical factors and alternative trading to Crude Oil and Diesel. The EIA reported previous week withdrawal was 21-bcf, which was in line with estimates. Total socks at 3.623-tcf are 320-bcf below the same week last year yet have pulled to within 58-bcf of the five-year average. Weekly inventory data are summarized below.

Natural Gas

EIA Weekly Inventory

11/19/2021

11/12/2021

Change

Year Ago

5-Year Avg

Region

East

               889

               900

             (12)

               937

               890

Midwest

           1,066

             1,079

             (14)

             1,134

             1,075

Mountain

               210

               212

               (2)

               242

               220

Pacific

               262

               261

                 1

               320

               302

South Central

           1,197

             1,191

                 6

             1,311

             1,195

Total

           3,623

             3,644

             (21)

             3,943

             3,681

Propane: Cash Propane prices extend previous day gains, though not near as much volatility. Conway ended $0.0075 higher to $1.2150; Mt Belvieu ended $0.0200 higher to $1.2050. Weekly inventory data showed Propane stocks decreased 1.0 million barrels keeping total stocks 13% below the five-year average and 19.0 million barrels below the same week last year. The draw was on domestic demand, which was 430,000-bpd above the previous week and 453,000-bpd above the same week last year. Exports were down 344,000-bpd to 1.048-mbpd, yet Production was also down; 37,000-bpd to 2.405-mbpd. Weekly inventory data are summarized below.

EIA Weekly Propane Inventory

11/19/2021

11/12/2021

Change

Year Ago

Change

Padd I (East Coast)

8.9

8.8

0.1

9.0

(0.1)

Padd II (Midwest)

24.8

24.9

(0.1)

25.8

(1.0)

Padd III (Gulf)

35.0

35.7

(0.7)

51.8

(16.8)

Padd IV & V (Rockies)

4.9

5.2

(0.3)

6.0

(1.1)

Total

73.6

74.6

(1.0)

92.6

(19.0)

Demand (mbpd)

1.624

1.194

0.430

1.171

0.453

“The risk of loss trading futures can be substantial. Each investor must consider whether this is a suitable investment. This report is for informational purposes only and is not to be construed as an offer to sell or a solicitation to buy the commodities or securities herein named. The information in this report has been obtained from sources believed to be reliable but is not necessarily all-inclusive and is not guaranteed as to its accuracy. Unless otherwise stated any quotes provided by Hill Petroleum does not include commissions or bid/ask spreads. Any opinions expressed in this report are those of the author. Individual employees of Hill Petroleum may express different or contrary opinions. The above recommendations may or may not be followed by Hill Petroleum or its employeefs."

Last Updated on Friday, 26 November 2021 08:49

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