Energy Markets Are Seeing A Round Of Selling To Start The Week

Energy markets are seeing a round of selling to start the week but are well off their overnight lows. ULSD futures were down more than 7 cents overnight, while RBOB gasoline futures were down 6 cents, but both have since recovered most of those losses and are trading down a little more than 3 cents. Efforts to reach a ceasefire in the Middle East, and reports that Israel was pulling back more troops from Gaza, both seem to be contributing to the pullback in prices, and to the bout of volatility we saw overnight. In addition, the US treasury secretary is in China for a tense round of conversations on topics such as manufacturing and trade.

While there weren’t any new attacks on Russian oil infrastructure over the weekend, spring flooding caused forced the shut down of a refinery after a dam burst. Russian officials are saying that the attacks on refining infrastructure are not causing material issues with supplies, but others are negotiating deals to buy gasoline from Borat’s home country as a plan B.

Money managers are getting more bullish on energy contracts, adding to their net length across the board last week, primarily through new long positions while some shorts were squeezed out as prices reach multi-month highs. Brent crude saw the net length held by the large speculator category of trader reach its highest since March 2023, while RBOB gasoline saw its largest speculative net length since January 2021 last week. Not coincidentally, RBOB contracts also saw their open interest increase to the highest levels since the Ukraine war broke out as the volatility following that event made trading in energy contracts too hot to handle for many.

Baker Hughes reported a net increase of 2 oil rigs drilling in the US last week, while natural gas rigs saw a net decline of 2 rigs. Weak natural gas prices are expected to keep a lid on drilling activity for both oil and natural gas this year even as WTI rallies north of $86.

Flint Hills reported another upset at its Corpus Christi West refinery over the weekend as restarted an FCC unit. That facility has had a few upsets ever since the January freeze, including a fire March 27, but this latest incident does not appear to have prevented that unit from coming back online.

Not Instagram worthy: Southern California regulators shot down a proposal to live stream refinery flaring events last week, which means there actually is in fact something in Southern California that won’t be on social media.

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