Cocktail Of Bearish News Sends Financial Markets Lower
A cocktail of bearish news sent financial markets around the world sharply lower on Monday, and energy futures had their biggest 1 day declines since that fateful week in April 2020 when WTI went negative, and products were trading in the 60 cent range. So far equity markets seem to be faring better than energy contracts, with most US indices seeing a recovery bounce this morning, while energy futures have already given up their overnight gains, and appear to have ended their 8 month bull run.
Now that the upward trend is broken, the June lows at $2.10 for RBOB and $1.95 for ULSD look like the next natural point of support, and if they break, it looks like we’ll head towards $1.90 for RBOB and $1.80 for ULSD, which is the area of congestion that held prices for about a month in the spring.
In some cases, these large sell-offs can create a snowball effect as speculative traders are forced to liquidate positions to meet margin calls, which creates more pressure to the downside, and may be what we’re seeing this morning as futures continue to slip further into the red. With money managers steadily increasing their long bets on energy prices this year, perhaps the determining factor on whether or not we see another big drop in the coming weeks is if those funds have the fortitude and finances necessary to ride out the storm.
RINs and Carbon credits also came under pressure during the widespread sell-off, albeit on a smaller scale than what we saw from crude and products, in another sign of the widespread liquidation that seemed to grip markets globally throughout the day.
Click here to download a PDF of today's TACenergy Market Talk.
Latest Posts
The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
Week 39 - US DOE Inventory Recap
Crude Oil Futures Are Leading The Energy Complex Higher This Morning With WTI Jumping 2% And Exchanging Hands Above The $92
Social Media
News & Views
View AllThe 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.