Lackadaisical Buying Action Sees Quick Reversal
Yesterday’s somewhat lackadaisical buying action saw a quick reversal on news that India is going through a fresh round of lockdowns. New Delhi was shut down for the week following the highest daily death toll the country has seen, and even that might be an understatement. If the situation doesn’t improve we could see a big shock to oil demand from the world’s third largest consumer.
Weak equities markets and the API’s estimate of a slight build in crude oil inventories seem to be taking the credit for the continuation of yesterday’s selloff. American crude oil futures are leading the way lower this morning, showing a 2.5% loss in the prompt month; gas and diesel contracts are both down around 1.9%. The Department of Energy’s version of the inventory report is due out at its regular time today (10:30 EDT).
Discussions between the U.S. and Iran are reportedly progressing towards a resolution as President Rouhani claims talks are 60% complete. While some argue a successful return of Iran’s sanctioned oil could destabilize global energy markets, some hold that their barrels never really left.
Soybean oil and corn futures (one of the main price drivers behind biofuel and ethanol RINs respectively) hit new eight-year highs yesterday, touching levels not seen since 2013. While the RIN credit prices tracked strongly with their underlying commodity for the last couple of years, we might see a separation as international trading takes futures on a wild ride.
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.