In Another Technical Breakout To The Upside 2-15

Market TalkMonday, Feb 15 2021
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We’re in another technical breakout to the upside for energy futures this morning after a strong rally Friday set the stage for WTI to break above $60 overnight, and for refined product to push through to new 13 month highs. 

The last time we saw futures trading at these levels was just after Iran launched missiles at a US base in Iraq in January of 2020, sparking some calls for $100 oil.  The highs set back then also happen to set the next layers of chart resistance and an upside price target as the rally continues.

Trading volume is light due to the President’s day holiday in the US.  Futures are trading until noon central time today, then will halt until the overnight session starts back up at 5pm.  Spot markets are not being assessed so most rack prices will stay steady unless this rally picks up more steam and forces suppliers to make a holiday change.

The rally in prices is welcome news for oil producers, and we saw the Baker Hughes rig count increase for a 12th straight week.  As has been the case for much of the past few years, the Permian basin accounted for the majority of the change in drilling activity with 5 of the 7 total oil rigs added in that region last week.

Speculators are also happy to see this rally, as they’ve continued to add to net length in oil and diesel contracts, although they have reduced their bets on higher gasoline prices for a 2nd straight week.  Net length in WTI is just a few thousand contracts away from reaching a 2.5 year high, and open interest in both WTI and Brent has grown rapidly over the past few weeks, in a sign that large funds are willing to make large bets that oil prices can continue moving higher even after a 70% rally in the past 3.5 months.

The new US Secretary of State announced Friday that he would be revoking the Houthi rebel’s designation as a terrorist organization, just 2 days after assuring Saudi Arabia the new administration would not stand by after the Houthi’s attacked a Saudi Airport.  Some reports suggested those attacks played a big role in Friday’s strong rally, even though they happened on Wednesday. 

Today’s interesting read:  Why the rapidly changing global refining landscape means big changes are in store for shipping routes.


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

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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
Pivotal Week For Price Action
Market TalkWednesday, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

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