Charts Are Still Giving Slight Favor To Another Price Rally As We Move Into Spring
Energy futures are starting the week on a soft note, after a strong finish Friday had the charts pointing higher. The about face is being blamed on an “unambitious growth target” set by China’s version of congress over the weekend, which suggests the world’s largest oil buyer won’t be buying quite as much.
Friday’s session had some good old-fashioned whiplash after a report suggested the UAE might be leaving OPEC had prices moving lower in the morning, before rallying to healthy gains after subsequent reports said those rumors weren’t true. If prices can manage to have a similar recovery today, charts are still giving slight favor to another price rally as we move into spring.
The CFTC is still struggling to get its weekly Commitments of Traders data back on schedule after a cyber-attack on a reporting company a month ago. The NYMEX data released Friday, which is 3 weeks behind, showed heavy liquidation by money managers as prices plummeted the first week of February. The ICE contract data which is staying on schedule shows that money managers were stepping back in to buy Brent and Gasoil contracts last week as prices rebounded.
Baker Hughes reported a decline of 8 active oil rigs in the US last week, bringing the total count to its lowest level in 6 months. The Permian basin accounted for half of the decrease. Natural gas rigs did increase by 3 on the week but remain 2 rigs short of where they started the year.
A decision from the White House is expected this week on the controversial “Willow Project” in Alaska, that could bring 180,000 barrels/day of new domestic oil production online in the coming years. Early expectations are the administration may attempt to compromise by further restricting the project to only 2 drill sites, down from 3 originally approved, and compared to the 5 originally proposed.
Exxon is threatening to walk away from its commitments to buy renewable diesel from the beleaguered Global Clean Energy (GCE) facility in Bakersfield California if that facility isn’t producing by the end of June. The filing also says Exxon filed a complaint compelling a court order to inspect GCE’s books and records to investigate concerns of misconduct and mismanagement.
Citgo reported a fire in a hydrocracking unit at its refinery in Corpus Christi on Friday afternoon. The report to the TCEQ said the fire was quickly extinguished and excess emissions were limited to just 90 minutes, suggesting operations may not be materially impacted.
Today’s interesting read from the FT: Why US environmental subsidies could backfire in a “global minimum” tax agreement.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllGasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading
Gasoline futures are leading the energy complex higher this morning with 1.5% gains so far in pre-market trading. Heating oil futures are following close behind, exchanging hands 4.5 cents higher than Friday’s settlement (↑1.3%) while American and European crude oil futures trade modestly higher in sympathy.
The world’s largest oil cartel is scheduled to meet this Wednesday but is unlikely they will alter their supply cuts regimen. The months-long rally in oil prices, however, has some thinking Saudi Arabia might being to ease their incremental, voluntary supply cuts.
Tropical storm Rina has dissolved over the weekend, leaving the relatively tenured Philippe the sole point of focus in the Atlantic storm basin. While he is expected to strengthen into a hurricane by the end of this week, most projections keep Philippe out to sea, with a non-zero percent chance he makes landfall in Nova Scotia or Maine.
Unsurprisingly the CFTC reported a 6.8% increase in money manager net positions in WTI futures last week as speculative bettors piled on their bullish bets. While $100 oil is being shoutedfromeveryrooftop, we’ve yet to see that conviction on the charts: open interest on WTI futures is far below that of the last ~7 years.
Click here to download a PDF of today's TACenergy Market Talk.
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.
Click here to download a PDF of today's TACenergy Market Talk.
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.