Energy And Equity Markets Starting Monday In Red

Market TalkMonday, Jan 14 2019
Petroleum Complex Selling Off

Energy and equity markets are both starting Monday in the red, marking a 2nd day of losses after a strong 2 week recovery rally. More bad economic news from China, the ongoing government shutdown, and softer treasury auctions are all getting some blame for the negative sentiment to start the week.

Venezuela continues to make headlines for all the wrong reasons, after it failed to make a $1 billion payment last week to comply with the deal struck a few months ago that would have left Citgo intact. While the court battles are likely to play out for much longer, this makes it more likely that eventually the US refineries and accompanying assets will eventually be auctioned off.

Nearly 12 years ago, Exxon Mobil pulled out of Venezuela after the government attempted a retroactive taxation policy that effectively nationalized many industries. That decision played a huge role in the crumbling of the country’s oil production (not to mention many other facets of its society) and now we’re seeing Venezuela try to encroach on Exxon’s activities in neighboring Guyana which now has a bright outlook for future oil production.

Baker Hughes reported a 2nd straight decline in US Oil rigs, with a drop of 4 last week, although the total count is still 121 rigs more than this time last year.

The CFTC is still not publishing Commitments of Traders reports due to the shutdown, but ICE reported a modest increase in Managed money net length held in Brent oil contracts last week, but the speculative bets on higher oil prices are only about 28% of what they were a year ago. Short positions in Brent are above their 5 year average, and have held relatively steady in the past two weeks in spite of the recovery rally. If those shorts start to get squeezed out of the market, that could be a catalyst for the next push for higher prices.

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Pivotal Week For Price Action
Market TalkThursday, Feb 29 2024

It's Another Mixed Start For Energy Futures This Morning After Refined Products Saw Some Heavy Selling Wednesday

It's another mixed start for energy futures this morning after refined products saw some heavy selling Wednesday. Both gasoline and diesel prices dropped 7.5-8.5 cents yesterday despite a rather mundane inventory report. The larger-than-expected build in crude oil inventories (+4.2 million barrels) was the only headline value of note, netting WTI futures a paltry 6-cent per barrel gain on the day.

The energy markets seem to be holding their breath for this morning’s release of the Personal Consumption Expenditures (PCE) data from the Bureau of Economic Analysis (BEA). The price index is the Fed’s preferred inflation monitor and has the potential to impact how the central bank moves forward with interest rates.

Nationwide refinery runs are still below their 5-year average with utilization across all PADDs well below 90%. While PADD 3 production crossed its 5-year average, it’s important to note that measure includes the “Snovid” shutdown of 2021 and throughput is still below the previous two years with utilization at 81%.

We will have to wait until next week to see if the FCC and SRU shutdowns at Flint Hills’ Corpus Christi refinery will have a material impact on the regions refining totals. Detail on the filing can be found on the Texas Commission on Environmental Quality website.

Update: the PCE data shows a decrease in US inflation to 2.4%, increasing the likelihood of a rate cut later this year. Energy futures continue drifting, unfazed.

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
Pivotal Week For Price Action
Market TalkWednesday, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

Click here to download a PDF of today's TACenergy Market Talk.