Modest Round Of Selling Picked Back Up

After a healthy recovery rally fizzled at the close of Monday’s trading, a modest round of selling has picked back up to start Tuesday’s session. It’s common to see a period of sideways price action as traders reassess, balance positions and/or lick their wounds following a heavy sell-off like we saw last week, so it’s possible that November will end with some choppy back and forth action.

The big drop in futures Friday when spot markets were closed created plenty of confusion across the downstream sectors of the industry, with many wondering why wholesale prices fell sharply on Monday even though futures were up on the day. The product price estimates in the daily market overview attachment show the net result from when spot prices closed Wednesday, until they reopened Monday.

As the 2 month melt-down drags on, concerns are growing for the health of US Oil producers, while US Oil refiners are spending billions to take advantage of that new production.

Speaking of US Refiners, there was finally some good news for Citgo in the past week: Venezuela reached a settlement agreement to maintain control of its US-based refining arm. There still are some hurdles to clear however. A similar deal failed previously when Venezuela couldn’t make its agreed-upon payments, and a visit by the head of Rosneft over the weekend was a reminder that not all of the country’s creditors will allow being moved to the back of the payment line.

Large speculators cut their net-long holdings in all of the “big 4” petroleum futures contracts (Brent, WTI, RBOB, ULSD) for a 6th consecutive week last week. Given the size of the drop we saw on black Friday, it seems likely that we could see this reduction in bets on higher prices continue for a 7th week, but the pace of liquidation is slowing, which suggests the big money betters may already have left the energy building. If true, this could be a contrary indicator suggesting that prices may be near a bottom, at least in the short term.

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