Energy Futures Are Sinking Lower So Far In This Week’s First Full Trading Session

Energy futures are sinking lower so far in this week’s first full trading session. The gasoline contract is leading the complex lower, shaving off 5 cents per gallon for a 2% loss to start the day. Heating and crude oil prices are following suit, trading 3 cents per gallon and $1.25 per barrel lower so far this morning.

The market excitement of an imminent debt deal reached by the White House and Congress seen in Monday’s trading has given way this morning. The agreement to suspend the US debt limit for the next two years agreed upon by President Biden and Speaker McCarthy originally had prices drifting higher, until uncertainties surrounding yet another rate hike by the Fed in June threw a wet blanket on bullish sentiment.

While not exactly taking credit for this morning’s selling action, the rise in tension between OPEC and its ‘+’ is certainly being considered by futures traders. Despite sundry sanctions, Moscow continues to peddle cheap crude, undermining Saudi Arabia’s/OPEC’s designs on “stabilizing” global oil prices. Last week, the Kingdom’s energy ministers issued a warning to those short selling oil futures, claiming that further production cuts are being considered.

Money manager’s net length in WTI futures continued to drop last week, with yet another refreshed round of bearish bets on the American crude oil benchmark. Speculation on European crude oil bounced in the bullish direction however, with an increase of more than 16,000 long positions. Covering shorts seems to be the stance taken on RBOB last week with only 705 new short positions while 10,607 bets were placed on higher prices.

Open interest in the NYMEX HO contracts continued to rise last week, while managers continued to shift to a hands-off approach on WTI futures following the aforementioned warning from Saudi Arabia on what will happen to short sellers.  

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