Nov 25, 20225 min read

Tidbits, Fuel, Markets & Rain Days Update 11/25/22

Highlights

The EU plans to apply price caps on natural gas prices have hit a dead-end for the fourth time this year after EU energy ministers failed yesterday to reach an agreement amid deep divisions. These are the same people who are trying to decide on Russian crude oil prices.

The head of Brazil's election court rejected a complaint from President Jair Bolsonaro's allies to challenge the presidential election, which the incumbent lost by a small margin.

Nationwide protests continued yesterday in Brazil calling for the military to intervene temporarily to hold another presidential election supervised by the military.

Four rail unions have aligned on a potential national strike date of Dec. 9, with the Signalmen's union agreeing to move back its date in coordination with other unions that rejected the labor deal.

Tidbits

The Biden Administration has announced Thanksgiving morning to avoid publicity that approval was granted to construct a new 2 million bpd oil export terminal on the Texas Gulf Coast. The approval comes despite the Democrats in Congress strongly supports restricting US oil exports to secure local supply. The project involves building a terminal about 30 miles south of Freeport, in Surfside. Despite its clear anti-oil stance, the Biden administration approved the facility which will become the country’s biggest piece of oil export infrastructure.

Wright on the Market has invested a lot of time, as many of you have also, to decide if diesel fuel prices should be locked-in for spring. Lance is more inclined to get fuel booked than Roger, but Roger is coming around to agree with Lance.

The seasonal trend on crude oil and related fuels bottoms around Thanksgiving. Below are the charts and you can see the bottom is more like the second week of December.

Essentially, the only difference between diesel fuel and heating oil is that home heating oil has a dye added to it that distinguishes it from untaxed or lower-taxed fuels. From a price standpoint, they are the same. Therefore, consider the heating oil comments applicable to diesel fuel.

The following information is from people who should know a lot more about petroleum markets than we do. We suggest you read and then a decide or do more research. Do not just postpone the decision. If you do not lock-in fuel, make it because that is what you decided.

These comments were written after the close Wednesday:

Heating oil futures were trading around the $3.3 per gallon mark, down from their June peak of $4.4, as increased domestic output helped ease some concerns about tight supplies. Refinery production increased last week, with EIA data showing that heating oil stockpiles rose 0.961 barrels. Still, the commodity remains up more than 40% since the beginning of the year, outperforming its peers, with solid demand and low inventories pushing prices higher. In the United States, diesel and heating oil inventories have been hovering at record low levels for this time of year, with shortages along the East Coast forcing suppliers to ration and initiating emergency protocols. At the same time, in northwest Europe, stockpiles are forecasted to hit a low in November and then narrow even more by March, as the EU restrictions on importing most Russian crude oil and refined products come into force on Dec. 5 and Feb. 5, respectively.

Gasoline futures extended losses to below $2.5 per gallon, moving toward a five-week low hit below $2.4 earlier in the week, after a bigger-than-expected inventory build last week eased concerns about market tightness. The latest EIA data showed US gasoline stocks rose by 3.058 million barrels in the week ended November 18th, the most since mid-July, compared with market expectations for a smaller 383,000-barrel rise. The report also showed gasoline production fell by 625 thousand barrels, the first weekly decrease since early October.

US natural gas futures fell to below $7.1/MMBtu, down from a 9-week high of $7.6 hit in the previous session on a smaller-than-expected draw in inventories last week and doubts whether or not Freeport LNG will be able to restart (export of liquified natural gas) operations next month. The latest EIA data showed US utilities pulled 80 billion cubic feet (bcf) of gas from storage during the week ending November 18th, below market expectations of an 87 billion draw. Freeport LNG delayed the plant's restart from November to December but has not yet submitted a request to restart the export plant, raising questions about another delay, which would mean more gas available for domestic use. Meanwhile, workers at the largest US rail union voted against a tentative contract deal reached in September, raising the possibility of a year-end strike that could disrupt coal deliveries and force power generators to burn more gas.

December Could Offer ‘The Mother Of All Buying Opportunities’ For Oil

By Josh Owens - Nov 23, 2022, 11:00 AM CST

Oil prices have been weighed down with recession fears and surging Covid cases in China. As the EU embargo on Russian oil looms, traders could see one last washout ahead of the ban which could take crude down to the low $70s.

Oil traders and speculators could see the “mother of all buying opportunities” for WTI crude oil in December, as oil prices are about to dip further in the coming days, CNBC’s Jim Cramer says. Oil prices have traded down so far this month, as fears of recession and China’s surging Covid cases have weighed on market sentiment despite the imminent EU embargo on imports of Russian crude oil by sea.

Early on Wednesday, Brent Crude traded at $85 per barrel, and the U.S. benchmark was below $80—at $78 a barrel after reports emerged that the EU is currently discussing a price cap on Russian oil of around $65-$70, which is not really capping the price of Russia’s crude which trades at a $20 a barrel discount to Brent anyway.

Citing a chart analysis by Carley Garner, co-founder and analyst at Decarley Trading, CNBC’s Cramer said that “She thinks there could be one last washout from this week, possibly early through December, and that washout could take crude down to the low $70s, or even the mid-$60s. Once we get there, she believes that could be the mother of all buying opportunities.”

According to the analyst, WTI Crude typically registers a big slide on or around Thanksgiving Day, exacerbated by thin trading volumes around the holiday and an OPEC meeting which is always held at some point at end-November or early December.

“Historically, some of the most devastating oil declines have occurred on or about Thanksgiving day,” Cramer said on Tuesday.

While oil could later rebound, a possible rout and turbulence in oil prices from Thanksgiving Day through early December could be a huge buying opportunity, according to Jim Cramer.

Earlier this week, investment bank Goldman Sachs slashed its (Brent crude) oil price forecast by $10 to $100 per barrel for the fourth quarter (2023), citing lockdowns in China that would dampen demand for the commodity.