Energy Complex Moving Higher
The energy complex is moving higher today after a couple of bearish DOE figures failed to provoke across-the-board buying yesterday. Gasoline futures sighed a 40 point loss on Thursday while a little more came out of the diesel prompt month contract at about -2 ¼ cents.
Diesel stocks continued lower and while that is expected this time of year, the days of forward cover chart, a look at our supplies + production vs demand, has hit a 5-year seasonal low and has reached levels not seen since 2008 and one time in early 2014. It could be that traders are banking on the restarts in Midwest refineries to save the day, last week saw a 7% production boost in PADD 2 throughput rates as the regions refineries are brought back from fall turnaround.
Ironically crude oil was the only of the major three contracts to settle with gains yesterday, in the face of a 10.3 million barrel build in inventories, the biggest build since February 2017 and 7th biggest in the history of the report. Apparently rumors and hopes of something actually coming from “supply cut talks” from OPEC was enough to keep the American benchmark in the green. The oil cartel will meet on December 6th to discuss production levels after which we will have not even close to a better idea of what to expect in 2019.
Prices are on the move this morning, RBOB and HO futures are adding around 3 cents so far today. While overtaking yesterday’s highs in pre-market trading seems bullish, the refined product contract still have a way to go to buck the bearish trend that’s been plaguing them since October. Peg $1.65 for gas and $2.15 for diesel as pivot points where the trend might spell higher prices going forward. WTI’s got a little further to go, will likely oscillate in the $50-$60 for the foreseeable future.
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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
Energy Futures Are Drifting Quietly Higher This Morning
Refined Products Holding Close To Break Even While Oil Prices Are Losing Just Under 1%
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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.