Gasoline And Diesel Prices Are Up Today While American And European Crude Oil Benchmarks Are Drifting
Refined product futures are drifting higher this morning, attempting to recover from last week’s selling that saw prices down 4% by the end of Friday. Gasoline and diesel prices are up around .5% today while American and European crude oil benchmarks are drifting lower to start the day.
The commitments of traders report showed a 10% drop in WTI net length held by hedge funds last week. Brent crude likewise saw a decline in long bets made by Money Managers for a sixth week in a row, lending credence to the idea that the recent trend of lower oil prices might be nearing completion.
Lower oil prices might not be the best this for everyone though: Baker Hughes reported yet another increase in active oil production platforms. Seven rigs started pumping last week, bringing the total active count to 563, 250+ more than were running this time last year.
The White House is set to announce its decision on the new Federal Reserve Chair this morning. While this might be one of the most important economic decisions Biden has made so far in his presidency, political factors might be taking the reigns in this nomination as the president seeks to secure support for his ~$2 trillion healthcare, education, and climate-change legislation.
Some technical oscillators are hinting at an oversold refined product futures market while weekly charts place both prompt month gasoline and diesel futures in a clearly defined downward trend. Lower prices are expected for both contracts with the $2 mark a viable price target in the near term.
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.