Global Markets Dealt Dose Of Fear

Global markets were dealt a dose of fear Thursday, after a couple of optimistic weeks had pushed trade war and recession concerns to the back burner of the geopolitical range. The ensuing sell-off pushed energy futures to the lower end of their recent trading range, after threatening the top end of that range earlier in the week. An overnight bounce leaves prices stuck in the middle once again, with few signs that the complex is ready to make its spring break.
A step backward in US-China trade talks seemed to spook stock markets around the globe Thursday, and with the equity/energy asset classes still showing a strong correlation, it wasn’t long until that selling spilled over into oil and refined products. As stocks reached their lows for the day, WTI was down more than $2/barrel and gasoline prices were down more than 6 cents. Both asset classes were able to bounce in the afternoon, and roughly halve their losses on the day.
Never let a good crisis go to waste: PDVSA is trying to use the new sanctions levied by the US as justification to overturn the ruling that would allow Crystallex to seize control (and likely create an auction for) Citgo’s shares. Citgo meanwhile continues to quietly weather the storm, operating its refineries and other downstream assets in a business-as-usual manner.
Energy took center stage in Congress this week as Senators proposed a bill to sue OPEC for colluding with Russia, while a proposal known as the “Green New Deal” was proposed in the House. While the broad proposal to overhaul energy in the US (among many other things) isn’t being taken too seriously just yet, it is an early warning shot that we’re in for 2 years of politicians debating the future of our industry as the 2020 elections approach.
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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.
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.
