Bullish Headlines Have Energy Markets Surging

Market TalkMonday, Jul 1 2019
Heavy Selling In Energy Futures

A pair of bullish headlines have energy markets surging to start the week, with most petroleum futures trading up more than 2%. An OPEC deal is bullish for supply, while a potential Chinese trade deal is bullish for demand – and for US equities which are also trading sharply higher to start the week.

Russia stole OPEC’s thunder by announcing they’d agreed to extend output cuts with Saudi Arabia through the end of the year. While the extended oil production cuts show a disciplined approach among the newly expanded cartel, the timing of the announcement also suggests Russia is taking more control, causing some to declare the end of OPEC.

Deal or no deal? Stock markets are surging this morning after the US announced it was suspending new tariffs and agreed to restart trade talks with China. While that news may not directly impact oil and refined product movements, it certainly helps alleviate some concerns about a global economic slowdown, which is bullish for demand.

Baker Hughes reported 4 more oil rigs were put to work last week, the 2nd weekly increase after reaching a 1 year low. The gains were spread out with the Woodford basin adding 4 rigs, Permian adding 2, the “other” category adding 3, while the Williston, Eagle Ford and Niobrara all had reductions for the week.

Money managers made slight reductions in their net-long holdings of Brent and WTI last week, but jumped in eagerly to add to RBOB length following the PES fire the previous week.

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Market TalkFriday, Sep 29 2023

The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures

The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.

The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.

We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.

The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.

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Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day

The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.

There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.

As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.

Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Pivotal Week For Price Action