Energy Prices Are Jumping Today On Reports That OPEC+ Are Planning On Cutting Production In Order To Stem Further Oil Price Declines

Energy prices are jumping today on reports that OPEC+ are planning on cutting production in order to stem further oil price declines. While there is no definitive word if there will be a cut and how much it will be, the upcoming meeting between the cartel’s ministers in Austria this Wednesday will be the first time OPEC officials have met since 2020, leading some to believe a major decision will be made. West Texas Intermediate crude oil futures are leading the complex higher this morning, adding $4.25 per barrel to start the day. Prompt month gasoline and diesel futures are up 10-12 cents per gallon.

The summer grade of gasoline in California remains at historic premiums over the national benchmark with both Los Angeles and San Francisco physical barrels valued at $2.30-$2.40 over the NYMEX futures price. The most recent run-up in gasoline prices, which has sky-rocketed retail prices to almost $7 per gallon, has driven the CA governor to ask that the California Air Resource Board allow and early release of winter blend gasoline.

The remnants of Hurricane Ian are dissipating over Maryland after causing power outages in Virginia and the Carolinas over the weekend. Impacts to energy infrastructure remained localized and minimal through this storm but we aren’t out of the woods yet. The NHC is tracking a system on the north coast of South America that has a 40% chance of developing in the next week and projects it moving into the Caribbean.

Money managers boosted their short bets on all three major American energy futures contracts last week. The net positions in both Heating Oil and WTI dropped significantly while there were enough bullish positions added onto the RBOB contract to keep its week-on-week change positive. Open Interest in crude oil futures remains at multi-year record low levels, signaling that market participants either packed up and went home or are maintaining a wait-and-see approach to making bets on oil prices.

Baker Hughes reported a net increase in active oil production rigs in the US last week. The addition of two production platforms brings the total count up to 604, which is the highest level it has been since the COVID lockdowns in March of 2020.

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