Quiet Start For Energy Markets

It’s a quiet start for energy markets Monday after a Friday wipe out pushed oil prices to their lowest level of the new year, while RBOB futures hit their lowest levels of the month so far. ULSD led the slide lower Friday and is still in the red this morning but still has more ground to make up as it led the push higher thanks to winter tailwinds that are rapidly being put in the rearview.

Money managers were acting modestly bearish in the latest CFTC Commitments of Traders report, liquidating long positions and adding new shorts on most of the big 5 Petroleum contracts. The exception to the rule last week came from the Gasoil contract (European ULSD equivalent) which saw healthy short covering and some fresh length push its speculative net length up by more than 14,000 contracts, compared to a decline of nearly 24,000 contracts for Brent and 19,000 for WTI.

Short positions held by large speculators betting on lower WTI prices are now at their highest level since August, even while short positions on Brent crude are holding near their lowest levels of the past 12 months.

The CFTC report is compiled as of Tuesday and published on Friday, so the data was put together before the market moving announcements that CARB’s LCFS rule change was being delayed due to legal technicalities, and the EPA’s dramatic update on plunging RIN generation in January. Money managers were acting modestly bearish in credit values leading up to those data points, and we’ll have to wait until this Friday to get a look at how they reacted.

Baker Hughes reported an increase of 7 oil rigs drilling in the U.S. last week, while the natural gas rig count declined by 1. The increase in crude oil rigs puts the total count at its highest level since September, which may cause some to suggest that a new wave of optimism is underway with producers, while others may note that the increased total is still just 16 rigs more than the 3 year low set in January. Perhaps most notable is that the increase had nothing to do with the Permian Basin, which saw its count hold steady at 301. The gains were spread among the Woodford (Oklahoma, not Reserve) Granite Wash, Eagle Ford and Marcellus.

Exxon reported a Benzene leak at its Baytown TX refinery over the weekend, but the incident was only said to last 10 minutes and didn’t appear to upset fuel production.