Energy Futures Facing Second Day Of Selling

Market TalkTuesday, Aug 3 2021
Pivotal Week For Price Action

Look out below? Energy futures are facing a second day of selling after an overnight rally attempt failed, setting up another test of the bull market that has pushed prices higher for the past 9 months. The headlines are trying to pin the move on rising COVID case counts, and weaker (but still expanding) economic numbers from the US and China, although the timing of the price swings intraday – and the lack of correlation with moves in equity markets – suggests this is more of a technically driven selloff (perhaps the hedge funds are growing weary of whiplash) rather than a macro-economic trade. 

Depending on how you choose to draw your trend-lines, you could say that if WTI stays below $70 today we’re destined to see a drop to $65 in short order, or you might saw we need another $2 of downside before saying the end of the rally is here. Refined products are in a similar situation, still trading some 16 cents above where they dropped to 2 weeks ago, but looking more likely to see another wave of heavy selling. 

Taking over the West: HollyFrontier is buying Sinclair’s energy assets, in a deal valued around $2 billion, just months after agreeing to buy Shell’s refinery in Washington state. The deal gives Holly an incredible amount of optionality across the rocky mountain & PNW regions with both traditional and renewable diesel refining capacity. That geographic concentration could also bring with it some anticompetitive concerns that could complicate closing.  

Speaking of anticompetitive concerns: OPIS is getting yet another owner. Dow Jones’ parent News Corp is acquiring the company in a deal valued at $1.15 billion, or roughly 17 times EBITDA. That deal should allow the merger of S&P Global (Platts parent) and IHS Markit to continue, after anti-competitive concerns prevented Platts from acquiring OPIS for the 2nd time in 10 years. Paying that multiple of earnings may sound frothy to some, and a sign of a market top to others, and looks like yet another sign of companies racing to make a play on the various aspects of emissions and carbon trading, which could make the deal a bargain if OPIS can outpace its rivals in that space.

Coming to America: See this Bloomberg article on the trucking industry reaching overseas to deal with the driver shortage plaguing the country, and why a backlog in the immigration processing system is limiting that option.

We had a busy start to the Atlantic hurricane season, then a long lull since Elsa hit a few weeks ago thanks to high levels of Saharan Dust limiting storm development. There’s a new system given low odds of developing over the next week, but it looks to be a fish storm. Don’t rest too easy, the forecast still calls for an above-average season and 90% of the typical activity in a year is still in front of us. 

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


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Pivotal Week For Price Action
Market TalkMonday, Oct 2 2023

Gasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading

Gasoline futures are leading the energy complex higher this morning with 1.5% gains so far in pre-market trading. Heating oil futures are following close behind, exchanging hands 4.5 cents higher than Friday’s settlement (↑1.3%) while American and European crude oil futures trade modestly higher in sympathy.

The world’s largest oil cartel is scheduled to meet this Wednesday but is unlikely they will alter their supply cuts regimen. The months-long rally in oil prices, however, has some thinking Saudi Arabia might being to ease their incremental, voluntary supply cuts.

Tropical storm Rina has dissolved over the weekend, leaving the relatively tenured Philippe the sole point of focus in the Atlantic storm basin. While he is expected to strengthen into a hurricane by the end of this week, most projections keep Philippe out to sea, with a non-zero percent chance he makes landfall in Nova Scotia or Maine.

Unsurprisingly the CFTC reported a 6.8% increase in money manager net positions in WTI futures last week as speculative bettors piled on their bullish bets. While $100 oil is being shoutedfromeveryrooftop, we’ve yet to see that conviction on the charts: open interest on WTI futures is far below that of the last ~7 years.

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

Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures

The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.

The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.

We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.

The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.

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

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day

The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.

There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.

As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.

Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.