Election Day In The US
It’s election day in the US and NYMEX futures are celebrating with a modest move higher this morning after reaching multi-month lows Monday and trading lower for most of the overnight session. If these gains can hold, it would snap a streak of 5-straight losing sessions for RBOB and WTI.
Brent Crude has not yet joined the US contracts in the move higher as the European grade is still digesting the unexpected reality that new waivers offered to buyers of Iranian crude may mean the global market will shift from shortage to excess in short order.
After announcing the waivers last week without providing details, the 8 countries that are getting a reprieve were named specifically Monday. China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey were all given an additional 180 days to purchase Iranian Oil. It’s important to note that those country’s account for the majority of Iranian Exports, meaning the sanctions may have minimal impact on oil supplies for the next 6 months.
It’s also worth noting that by naming Taiwan, the US is also sending a message to China that it is willing to move away from the long-held policy of not naming the disputed territory as a stand-alone nation, which could have consequences in the ongoing trade-tantrums.
The 6 month waivers also appear to be a cunning move as that will coincide with new infrastructure projects in the US to get more Permian Basin crude oil to the coast, and for more of the largest crude oil tankers to bring it to the global market.
While it’s unlikely that the mid-term election results will have much of a near-term impact on energy supplies nationwide, Colorado is voting today on a measure that could drastically reduce drilling activity in the state, which ranks as the 6th largest in oil and natural gas production.
Good news for Canadian Oil Producers, Western Canadian Select prices surged more than 10 percent in Monday’s trading. Bad news? WCS is still only $20/barrel.
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Energy Futures Are Drifting Quietly Higher This Morning
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
The energy complex is trading modestly lower so far this morning with WTI crude oil futures leading the way, exchanging hands $1.50 per barrel lower (-1.9%) than Tuesday’s settlement price. Gasoline and diesel futures are following suit, dropping .0390 and .0280 per gallon, respectively.
A surprise crude oil build (one that doesn’t include any changes to the SPR) as reported by the American Petroleum Institute late Tuesday is taking credit for the bearish trading seen this morning. The Institute estimated an increase in crude inventories of ~5 million barrels and drop in both refined product stocks of 1.5-2.2 million barrels for the week ending April 26. The Department of Energy’s official report is due out at it’s regular time (9:30 CDT) this morning.
The Senate Budget Committee is scheduled to hold a hearing at 9:00 AM EST this morning regarding a years-long probe into climate change messaging from big oil companies. Following a 3-year investigation, Senate and House Democrats released their final report yesterday alleging major oil companies have internally recognized the impacts of fossil fuels on the climate since as far back as the 1960s, while privately lobbying against climate legislation and publicly presenting a narrative that undermines a connection between the two. Whether this will have a tangible effect on policy or is just the latest announcement in an election-yeardeluge is yet to be seen.
Speaking of deluge, another drone attack was launched against Russian infrastructure earlier this morning, causing an explosion and subsequent fire at Rosneft’s Ryazan refinery. While likely a response to the five killed from Russian missile strikes in Odesa and Kharkiv, Kyiv has yet to officially claim responsibility for the attack that successfully struck state infrastructure just 130 miles from Moscow.
The crude oil bears are on a tear this past week, blowing past WTI’s 5 and 10 day moving averages on Monday and opening below it’s 50-day MA this morning. The $80 level is likely a key resistance level, below which the path is open for the American oil benchmark to drop to the $75 level in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Energy Futures Are Drifting Quietly Higher This Morning
Energy futures are drifting quietly higher this morning as a new round of hostage negotiations between Israel and Hamas seem to show relative promise. It seems the market is focusing on the prospect of cooler heads prevailing, rather than the pervasive rocket/drone exchanges, the latest of which took place over Israel’s northern border.
A warmer-than-expected winter depressed diesel demand and, likewise, distillate refinery margins, which has dropped to its lowest level since the beginning of 2022. The ULSD forward curve has shifted into contango (carry) over the past month as traders seek to store their diesel inventories and hope for a pickup in demand, domestic or otherwise.
The DOE announced it had continued rebuilding it’s Strategic Petroleum Reserve this month, noting the addition of 2.3 million barrels of crude so far in April. Depending on what the private sector reported for last week, Wednesday’s DOE report may put current national crude oil inventories (include those of the SPR) above the year’s previous levels, something we haven’t seen since April of 2022, two months after Ukraine war began.
The latest in the Dangote Refinery Saga: Credit stall-out, rising oil prices, and currency exchange.
Click here to download a PDF of today's TACenergy Market Talk.