Energy Futures Are Back On The Move Higher To Start The Week

Market TalkMonday, Jan 31 2022
Pivotal Week For Price Action

Energy futures are back on the move higher to start the week, after ending on a softer note Friday in what appeared to be a round of profit taking after a strong rally. The charts continue to point higher, although another big pullback is likely along the way as several short term indicators remain in overbought territory. The saber rattling on either side or Ukraine, volatile stock markets, the backside of the Omicron hill, and another attack on the UAE are all making headlines to start the week, and could each take their turn getting credit for whatever move the market takes that day. It does seem that a major selloff will be challenging until the Ukraine situation clarifies in one form or another, and as long as that’s lingering a spike to $100 for oil and $3 for products cannot be ruled out.

The East Coast is digging out from the weekend storm that dumped 2 feet of snow in places, but terminal disruptions appear to have been minimal and power outages not as widespread as feared. For those that can’t get enough of these events, you’re in luck as another major storm is set to sweep across the US in the back half of the week, which may bring the first big snow and ice event back to Texas since last year’s Polar Plunge crippled the state.

It’s the last trading day for February RBOB and HO futures, so make sure you’re looking to the March RBH/HOH contracts for direction if your market hasn’t already shifted. The Feb ULSD (HO) contract has been particularly volatile lately, rallying 26 cents last week, then dropping by a dime from its high on Friday, before moving higher again today. With just a few hours left for that contract, don’t be surprised if there are more fireworks today.

Money managers looked like they were taking some profits off the table in Crude oil and gasoline contracts last week, reducing their net length slightly as of last Tuesday after weeks of increases. The large speculative trade category continued to add length in diesel however, with both ULSD and Gasoil contracts seeing new longs added during the week, and ULSD saw a fair amount of short covering, which may help explain part of the recent spike in prices.

Baker Hughes reported 4 more oil rigs were put to work last week in the US, resuming the steady increase after last week saw the first net decline in 3 months. The Permian basin, which accounts for more than half of the total US rig count, has held flat on its total count of 293 rigs for the past month, even as the EIA predicts that the basin will set new production records this year as efficiency gains are expected to help offset the headwinds of a tight labor market and the supply-chain bottlenecks most people are tired of hearing about by now.

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

Market Talk Update 1.31.22

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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.