US Stock Markets Are Holding Their Upward Momentum

Energy markets are coming under pressure again to start the week, following reports that Saudi Arabia is having to cut its deliveries to China despite lowering prices as demand in the world’s largest oil buyer continues to struggle. A Chinese stimulus package worth more than $839 billion announced Friday seems to have fallen flat with commodities and Asian equity markets all sliding, while US stock markets are holding their upward momentum.

Money managers were acting bullish leading up to the US elections, with large speculators adding nearly 135,000 contracts of net length in the big 5 petroleum contracts as of last Tuesday via a combination of new length and short covering. The fact that oil prices are now down nearly $4/barrel and refined products nearly 10 cents/gallon since that data was compiled show the challenges with trying to predict these markets. The largest single change in any of the contracts came from European gasoil (ULSD equivalent) which saw more than 33,000 short positions liquidated by the managed money category last week, wiping out nearly 2/3s of the total net short position held by funds.

Neste reported that it was forced to shut down its Rotterdam renewable refinery Friday after a fire and expects the downtime to limit its output for the entire quarter. At roughly 90mb/day that facility is already the largest in Europe and is in the process of doubling its capacity. The company said the fire would not change the timeline of their expansion, currently expected to come online in 2026.

California’s LCFS values continued to rally to their highest level of the year Friday, before a vote Friday night that authorized CARB to make the program even more stringent, which was opposed by both consumers fearing that the nation’s highest priced fuel will get even worse, and by those that suggest the new requirements don’t go far enough. Among the changes to the program are requirements to minimize land use changes by requiring fuel producers to track feedstocks back to their origin point (an attempt to stop fraudulent palm oil blending) and will require independent feedstock certifications.

The US Bureau of Safety and Environmental Enforcement reported that roughly 28% of Gulf of Mexico oil production has been shut in as a precaution while Rafael churns through the area. The storm is weakening quickly however, which was already allowing some production to come back online Sunday, and that should ramp up quickly this week.

Valero reported an upset at its Three Rivers TX refinery over the weekend in a Sulfur Recovery Unit. No further details were provided and it’s unlikely that will have any impact on Gulf Coast basis values as the facility is far from the Colonial pipeline origin points.

Baker Hughes reported that both the oil and natural gas rig counts in the US held steady last week.