Energy Futures Sent Sharply Higher
Improving outlooks for both the President’s health and a congressional stimulus package, and yet another hurricane threat staring down refining country are combining to send energy futures sharply higher to start the week with several contracts up around five percent in the early going.
RBOB gasoline futures are once again leading the action, up nearly six cents so far today, wiping out the bulk of last week’s losses. The big bounce is another victory for the sideways trading range as technical support held yet again, and suggests we’ll see more sideways action in October when last week it was looking like we could see a price collapse.
The break in storm activity is officially over. Tropical Storms Gamma and Delta were both named, and Delta appears like it could be a hurricane pointing for Louisiana this weekend. The current forecast cone keeps Houston out of the possible range, but Pt. Arthur and Lake Charles are still possibilities, and the current path has this system heading directly over New Orleans, which has already narrowly avoided a couple direct hits earlier in the season. The P66 Alliance refinery chose to move up maintenance after shutting ahead of Sally, so it is already closed, and we’re likely to see other precautionary closures later this week if this path holds.
Baker Hughes reported six more oil rigs came online last week, five in the Permian and one in the Bakken, which puts the total U.S. count at 189, its highest level since mid-June. While that’s a bit of positive news for the struggling industry, keep in mind the count is exactly 600 rigs less than it was this same week a year ago.
Money managers are looking more bearish for oil prices this week, cutting back long positions in WTI and Brent, and adding new shorts to WTI to drive down the net length held by the large speculative category of trader. Net length in RBOB continues to tick up in a counter-seasonal fashion, as it appears funds are currently willing to bet that COVID recovery factors will be enough to offset the typical winter slump in driving demand.
A Reuters article over the weekend notes that the rush to convert traditional petroleum refineries to renewable diesel facilities in the U.S. may mean more product exports to Canada, as facilities north of the border won’t be able to meet the country’s new fuel standards for several more years.
Remember a year ago when trade talks were the big story? A WSJ article notes how the U.S./China trade deal is driving more oil exports and eating into the Saudi’s market share.
Click here to download a PDF of today's TACenergy Market Talk.
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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.
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.
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.