Energy Futures Starting Week With Modest Round Of Buying

Market TalkMonday, Aug 19 2019
Energy Complex Trading Lower on OPEC news today

Energy futures are starting the week with a modest round of buying as stock markets point to a strong open, giving a temporary reprieve on fears of a recession and allowing attention to turn towards new oil supply drama.

There was another drone attack on a Saudi oil field over the weekend that’s getting credit for early buying, although reports suggest that production was not affected.

The US attempted, unsuccessfully, to intervene and prevent the Iranian crude tanker from being released by Gibraltar. Now we’ll have to see if Iran releases the British ship it’s been holding captive in retaliation, or if it uses the US intervention as an excuse to change tactics yet again.

More bad news for Venezuela: reports this morning that China National Petroleum Corp, one of the last buyers remaining for Venezuelan crude, was suspending purchases due to US sanctions.

OPEC’s monthly report, released Friday, showed the cartel’s output dropping sharply again and reaching the lowest level of the past 5 years. Saudi Arabia continued to lead the cartel, accounting for more than half of the monthly decline, adding to less-voluntary reductions from Iran, Venezuela, Libya and Nigeria. The report also painted a weak picture for demand, with both global economic and oil consumption estimates reduced further over the past month.

Baker Hughes reported an increase of 6 oil rigs working last week, snapping a 6 week streak of declines. The total US oil rig count is still 99 below year ago levels.

Money managers seemed a bit unsure of themselves last week – which isn’t hard to understand given the volatility we’ve witnessed lately – adding to WTI net length, while cutting their long exposure in Brent, RBOB and ULSD. The drop in RBOB length was perhaps the most notable as it appears the large speculators are starting to bail out of gasoline bets a couple months earlier than last year, and unless we see something to disrupt supplies as driving season comes to an end, it seems like there could be more downside pressure to come on gasoline prices.

CLICK HERE for a PDF of today's charts

Energy Futures Starting Week With Modest Round Of Buying gallery 0

News & Views

View All
Pivotal Week For Price Action
Market TalkFriday, Mar 1 2024

Oil Futures Are Leading The Energy Complex In A Modest Rally To Begin March Trading

Oil futures are leading the energy complex in a modest rally to begin March trading, with WTI and Brent both up around $1.50/barrel, while refined products are adding around 2 cents in the early going.

RBOB gasoline futures rolled to a summer-grade RVP with the April contract in prompt position this morning. West Coast cash markets are already converted to summer grades, so they’re holding their premiums to futures, while the markets east of the Rockies are now trading at substantial discounts to futures as they move through their remaining winter-cycles over the next 4-6 weeks. The high trade for the April RBOB contract last month was just north of $2.63, which sets the first layer of resistance to a March madness gasoline rally just about 3 cents north of current values.

While gasoline looks somewhat bullish on the charts, and has seasonal factors working in its favor, diesel prices look weak in comparison with prices reaching a 6-week low Thursday before finally finding a bid, and the roll to April futures cut out 3 cents from prompt values. Diesel prices also don’t enjoy the seasonal benefits of gasoline, with a winter-that-wasn’t offering no help for supplemental diesel demand to replace natural gas in the US or Europe.

Speaking of winter weather, the West Coast continues to get the worst of it in 2024, with a casual 10 feet of snow with 100+ mile an hour wind gusts hitting the Sierra Nevada range. While the worst of that winter storm is happening far from the coast, the San Francisco bay area is under a gale warning starting this afternoon.

The wildfires in the Texas panhandle are now the largest in state history, impacting more than 1 million acres of land. The P66 Borger refinery is caught between the blazes, but so far has not reported any operational issues or plans to change operations at the facility. Valero’s McKee refinery is located just 50 miles from Borger, but looks to be far enough north and West to not be threatened by the fires, for now at least.

Mass Exxodus? A Reuters report noted that Exxon had notified its traders that it was cutting their salaries, in another sign that the major’s move back into trading wasn’t going so well. Exxon’s Exodus has already been a bit of a joke for the past few years, and now that the traders are being targeted, don’t be surprised if the cube photos are taken to a new level.

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

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