Futures Drift Lower in Abbreviated Juneteenth Session
US stock markets and banks are closed for the Juneteenth holiday, and while NYMEX energy futures are trading in an abbreviated session, there is no settlement today, and spot markets around the country aren’t being assessed.
We’re seeing a small pullback in refined product prices after ULSD futures rallied to a 2-month high, while oil prices are seeing small gains in very quiet trading as most market participants in the US have taken the day off. Futures will halt trading at 1:30 eastern, with all trades done today included in Tuesday’s activity.
The national hurricane center is giving a 100% chance that the storm system churning across the central Atlantic will be named in the next two days and is giving 40% odds of a 2nd storm just behind the first forming over the coming week. Most early model runs keep the first storm out to sea as it turns north later this week, but there are still some forecast tracks that have it heading towards the East Coast, so we’ll need to keep an eye on it.
Money managers were cutting back their bets on higher oil and diesel prices last week, meaning many missed out on the late week rally. Gasoline saw a tick higher in net length held by large speculators, driven by a heavy round of short covering.
Baker Hughes reported more declines in drilling activity with the oil rig count dropping by 4, and the natural gas rig count dropping by 5.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllThe 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.