Energy Prices Recovered All Of Thursdays Losses
Energy prices have recovered all of Thursdays losses in early morning trading today: gasoline and diesel contracts are up two cents this morning while American and European crude grades add on between $.50 and $1 each.
Lower prices were being loosely attributed to some strongly worded social media posts made by the White House yesterday insisting that the world’s largest oil cartel should ‘get prices down now’. This comes days after Saudi Arabia stated it’s comfortable letting crude prices continue their gradual climb to $80 per barrel.
Speaking of, OPEC is putting on a problem-solving forum in Algeria on Sunday to figure out who and where the Iran replacement barrels will come from. With an estimated 2.5 million barrels of crude oil per day up for grabs due to sanctions on the Islamic Republic, the meeting is expected to agree that Russia will cover the deficit. The cartel is expected to leave its own production expectations untouched.
‘Dynamic Development’ seems to be the name of the game in as far as tropical weather goes. A blast of Saharan dust has been keeping storms from organizing so far this week but there are now four disturbances in the Atlantic. Fortunately, for now anyway, it looks like only one of these has a chance for cyclonic development in the next week and, since it is just off the Western coast of Africa, poses no threat the States for the several few days.
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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.
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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.