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01-25-2022 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 Tuesday, January 25, 2022

Date

Crude Oil

Diesel

RBOB

Natural Gas

01/18/2022

$85.43 G22

$2.6740 G22

$2.4318 G22

$4.2830 G22

01/19/2022

$86.96 G22

$2.6923 G22

$2.4570 G22

$4.0310 G22

01/20/2022

$86.90 G22

$2.6718 G22

$2.4622 G22

$3.8020 G22

01/21/2022

$85.14 H22

$2.6912 G22

$2.4424 G22

$3.9990 G22

01/24/2022

$83.31 H22

$2.6274 G22

$2.3980 G22

$4.0270 G22

In the News:  Crude Oil and Refined Product stocks started the week lower despite several ongoing bullish headline. The selloff was mostly technical, however. Prices started lower on concern the Fed would be increasing benchmark interest rates higher and faster than anticipated in an attempt to curb runaway inflation. That same concern also drove equity markets lower and the Dollar higher. (When energies settled the DOW was down 332 points to 33,918.) Once the selling started computer generated trading, which allows speculators to take profits and await a “fundamental” move before coming back in. There is still plenty of support with geopolitical concerns including Yemen’s Houthi rebel attacks in the United Arab Emirates, OPEC’s 3rd largest producer. And tensions with Russia looking like they will initiate a hostile takeover of Ukraine. If they do the U.S. has threatened sanctions, which would restrict Russia’s ability to export oil. Fundamentals were not as bullish as previous several weeks, yet not bearish due to strong demand and significant stock deficits compared to the five-year average in all three product categories. Weekly demand showed Gasoline up 318,000-bpd to 8.224-mbpd, Distillate was up 807,000-bpd to 4.556-mbpd. Refinery Utilization slipped 0.3%, to 88.1% of capacity

Products: While trying to keep up with NYMEX volatility Group and Chicago basis levels basically reversed Friday’s movement. Group Gasoline basis finished $0.0125 higher to -$0.0700; Group Diesel basis ended $0.0025 lower to -$0.1450. Chicago Gasoline basis ended $0.0100 higher to -$0.1300; Chicago Diesel ended $0.0100 lower to -$0.2100.

With Crude Oil down $1.83/bbl one would think NYMEX implied Refiner Margins would improve, however the drop in Refined Product prices was even larger. The March Gasoline Crack ended $0.03/bbl lower to $17.58/bbl; the March Diesel Crack ended $0.35/bbl lower to $25.28/bbl.

Overnight: Energy futures are mixed this morning on the overnight electronic session as the Fed begins its two-day meeting.   As of 05:40 in the spot months; (Mar) WTI Crude Oil is $0.06 lower to $83.25; (Mar) Brent Crude Oil is $0.10 higher to $86.37; (Feb) Diesel is $0.0107 lower to $2.6167; (Feb) RBOB $0.0044 higher to $2.4024; (Feb) Natural Gas is off 52 to $3.9750.

Short Term: The FOMC begins its two-day meeting today with expectations they will accelerate interest rate increases and bond buying decreases. Some analysts expect the Fed to announce increases of as much as 200 basis points to benchmark interest rates. The action is necessary as the Biden administration destroys the U.S. economy along with its energy production. Overall the market remains very bullish with huge support coming from geopolitical tensions.   Russia is positioning military assets along the Ukraine border in apparent preparation to invasion. The U.S. State Department authorized the departure of nonessential staff and family members from its embassy in Kyiv. NATO said it was putting forces on standby and reinforcing easter Europe with more ships and fighter jets in response. In the Middle East the United Arab Emirates said it intercepted tow missiles over its capital Aby Dhabi, which it said were launched by Iran-backed Houthi militants. Meanwhile, OPEC + is underproducing their quota by 750,000-bpd as smaller members struggle and large producers enjoy the prices going up. Forward contracts may look high in Denver compared to rack prices, but it’s the rack price that is skewed as basis is abnormally low. Once supply begins to tighten, as it does every spring, prices will catapult higher regardless of NYMEX futures. With Biden in charge $100/bbl Crude Oil is a conservative estimate.

Natural Gas: Natural Gas futures rebounded from Thursday losses as cold weather and strong heating demand offset bearish fundamental data. The EIA reported previous week withdrawal was 206-bcf, a bit higher than expected. Yet total stocks at 2.810-tcf are plenty adequate to meet the balance of winter heating demand. The year-on-year deficit increased to 226-bcf from 200-bcf the previous week. The surplus to the five-year average is 33-bcf, down from 72-bcf the previous week.

Propane: Cash Propane prices pulled back with influence of sharply lower Crude Oil to start the new week.    Conway ended $0.0175 lower to $1.1575; Mt Belvieu ended $0.0200 lower to $1.1600. On Wednesday the EIA reported Propane stocks decreased 3.7 million barrels, about ½-million above expectations. Exports decreased 607,000-bpd yet demand increased 689,000-bpd. Production increased 17,000-bpd to 2.435-mbpd. The year-on-year deficit was trimmed to 1.1 million barrels, yet total stocks are 7% below the five-year average. However, Midwest stocks now appear adequate to meet the rest of winter heating demand, although numerous terminal outages are reported through Illinois, Iowa, Kansas, and Nebraska. Mid American Pipeline announced yesterday allocations will run through February.

“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."

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