Energy Futures On The Move Higher

Market TalkFriday, Jan 4 2019
Rare Red Day For Energy Markets

Energy futures are on the move higher again this morning, marking a 5th day of gains for crude oil, and a 3rd for refined products, if the early gains can hold. Prices are approaching a pivotal short term technical test that may determine how long this recovery rally can last.

After Wednesday’s 10 cent reversal, Thursday’s session seemed a bit tame with only a 6 cent swing in gasoline and diesel prices. Strong early morning gains of 4+ cents were temporarily wiped out when the sell-off in US stock markets picked up steam mid-morning, but the buyers stepped back in to push prices higher on the day.

Old support becomes new resistance: Both RBOB and ULSD futures are challenging price levels that acted as support back in November again this morning, which happens to be right where they stalled out during Wednesday’s early spike. If they can break through that overhead resistance there’s room for another 10 cents of upside. If they fail however, the longer term bearish trend will remain intact.

The API was said to show a decrease in crude oil stocks of 4.5 million barrels last week (a common occurrence at year end due to tax implications of imports) while refined product inventories had large builds of 8 million barrels for gasoline and 4 million barrels of distillates. The DOE’s version of the weekly stats is due out at 11am eastern today. The EIA is making the most of its funding this week, publishing a new note on retail gasoline prices, which dropped in 2018 for the first time in 3 years.

The December payroll report showed an increase of 312,000 jobs for the month, and both October and November job counts were revised higher. The headline (U-3) unemployment rate ticked higher to 3.9% while the U-6 rate held steady at 7.6%. The US dollar index jumped immediately after the report as the increase in payrolls, which was stronger than most forecasts, may encourage the FED to continue with tighter monetary policy. Energy prices have shrugged off the news, and the move higher in the dollar so far, and continued on their early up-trend.

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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.

Pivotal Week For Price Action