Energy Assets Attacked Again

Market TalkMonday, Dec 14 2020
Late Rally Pushes Prices Into The Green

Energy prices are ticking higher again to start the week, after taking a break in Friday’s session. Prices are holding just below the nine month highs set last Thursday, with a trio of fundamental, technical and sentimental factors all suggesting we may see another breakout today.

U.S. equity markets are moving higher this morning in what appears to be at least somewhat driven by optimism over the initial rollout of the first FDA approved COVID vaccine over the weekend. Of course, anytime the market rallies these days, stimulus package hopes also are given credit, even though there’s no clear signs of progress at the moment.

An oil tanker was apparently attacked off the coast of Saudi Arabia early this morning. That’s the fourth time energy assets in the region have been targeted, and this has the potential to be by far the most meaningful of those attacks as it temporarily shut operations in the country’s busiest port, and reminds the market that we won’t always be able to only worry about an overabundance of supply as we’ve done for most of this year.  

Baker Hughes reported 12 more oil rigs put to work last week, five in the Permian Basin, three in the Eagle Ford, one in the D.J. and the rest scattered in smaller basins. While the rig count has increased in 11 of the past 12 weeks, and the nine month highs for oil prices are likely to continue this trend of modest expansion, it’s worth noting that the total U.S. rig count is still below the lowest level set in the previous price crash five years ago.

Money managers continue to add to their bets on higher energy prices, with Brent, RBOB, ULSD and Gasoil all seeing weekly increases in large speculative net length, although WTI length dropped slightly after five straight weeks of gains. A Bloomberg article suggests this trend could continue as the oil trade has become a popular way to bet on COVID recovery, which could draw in the bandwagon jumpers who missed out on a 40% increase since November 1, and keep pushing prices higher. 

Today’s interesting read: The independent traders who made big money when WTI went negative in April, and how they’re now fighting to prove they did nothing wrong, and hold onto those gains.

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

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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.