Energy Futures Are Seeing A Modest Sell-Off To Start The Week

Energy futures are seeing a modest sell-off to start the week, keeping the downward trend-line intact for refined products despite a bounce in prices to end last week. While the ground war in Gaza advances, there are still no signs of disruption to global supply flows, easing concerns that the war’s escalation will impact prices. 

Money managers had another conflicting week, making small reductions in net length for WTI, Brent and ULSD, while adding to their bets for higher prices in RBOB and Gasoil contracts. 

Perhaps the most notable change in the large speculator positions on the week were the large increases in short positions, suggesting some funds saw the price spike when the war broke out as a good selling opportunity.

Baker Hughes reported an increase of 2 oil rigs drilling in the US last week, a 3rd straight week of increases after declining steadily the first 9 months of the year. There has been much speculation on how Exxon’s purchase of Pioneer may impact drilling activity in the Permian basin, which accounts for roughly 60% of the rig count and production in the US. Some analysts believe the redundancy between the two systems will lead to a lower rig count, while others think the combined entity will be able to drill new parts of the Permian that have yet to be developed.   

We’re just about down to the last month of the Atlantic Hurricane season, and the NHC is tracking two more potential systems. One is approaching the Bahamas but is given only 20% odds of developing and early models suggest another favorable pattern will push this storm out to sea. The other is given 50% odds of being named but so far appears like a threat to Central America, not the US. 

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