MLK Jr. Day’s Quiet Start After Last Week’s Recovery Rally

Market TalkMonday, Jan 16 2023
Pivotal Week For Price Action

NYMEX futures had their strongest week since October last week, with WTI, ULSD and RBOB all moving higher every day.  That strong rally came after the worst start to a year since the early 90s however, leaving the complex rangebound despite 5 straight days of steady buying.  

It’s MLK Jr. day so futures are trading in an abbreviated session and will not have a settlement.  It’s a federal holiday so banks and stock markets are closed and cash markets are not being assessed, so many in the industry will be taking the day off.  There isn’t much happening so far in the futures markets, so don’t expect many changes in rack prices unless something big happens in the next few hours.

RBOB did manage to push through to new highs for 2023 in Friday’s session, which opens the door on the charts for a run at the $2.80 level if it can hold above $2.50 this week.  ULSD and WTI have not yet been able to regain their 2023 starting values despite last week’s big rally, so the bulls still have more work to do if they’re going to regain control of this market.

It’s interesting that RBOB was the only contract to break through to new highs last week, as it was also the only contract in the petroleum complex to see an influx of funds from money managers.  All of the other contracts saw a drop in net length held by the large speculative category of trader, with long position liquidations the driver vs new shorts being added for most. 

The Swap Dealer position for WTI has reached a 5 year low in the past week which suggests that domestic producers aren’t hedging as much of their future production.  What we can’t tell from that figure is whether that means there’s newfound confidence that prices will remain at profitable levels for the foreseeable future, or if rising margin and interest rates are just making hedging cost prohibitive. 

Baker Hughes reported 5 more oil rigs working in the US last week, while natural gas rigs declined by 2.  The Permian basin lead the increases in drilling activity, adding 3 rigs on the week.  California was a surprise adding 1 rig on the week, bringing the state’s total to 5, compared to 379 for Texas and 103 in New Mexico.

Click here to download a PDF of today's TACenergy Market Talk.

Market Talk Update 01.16.2023

News & Views

View All
Pivotal Week For Price Action
Market TalkThursday, Feb 29 2024

It's Another Mixed Start For Energy Futures This Morning After Refined Products Saw Some Heavy Selling Wednesday

It's another mixed start for energy futures this morning after refined products saw some heavy selling Wednesday. Both gasoline and diesel prices dropped 7.5-8.5 cents yesterday despite a rather mundane inventory report. The larger-than-expected build in crude oil inventories (+4.2 million barrels) was the only headline value of note, netting WTI futures a paltry 6-cent per barrel gain on the day.

The energy markets seem to be holding their breath for this morning’s release of the Personal Consumption Expenditures (PCE) data from the Bureau of Economic Analysis (BEA). The price index is the Fed’s preferred inflation monitor and has the potential to impact how the central bank moves forward with interest rates.

Nationwide refinery runs are still below their 5-year average with utilization across all PADDs well below 90%. While PADD 3 production crossed its 5-year average, it’s important to note that measure includes the “Snovid” shutdown of 2021 and throughput is still below the previous two years with utilization at 81%.

We will have to wait until next week to see if the FCC and SRU shutdowns at Flint Hills’ Corpus Christi refinery will have a material impact on the regions refining totals. Detail on the filing can be found on the Texas Commission on Environmental Quality website.

Update: the PCE data shows a decrease in US inflation to 2.4%, increasing the likelihood of a rate cut later this year. Energy futures continue drifting, unfazed.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Feb 28 2024

It’s Red Across The Board For Energy Prices So Far This Morning With The ‘Big Three’ Contracts All Trading Lower To Start The Day

It’s red across the board for energy prices so far this morning with the ‘big three’ contracts (RBOB, HO, WTI) all trading lower to start the day. Headlines are pointing to the rise in crude oil inventories as the reason for this morning’s pullback, but refined product futures are leading the way lower, each trading down 1% so far, while the crude oil benchmark is only down around .3%.

The American Petroleum Institute published their national inventory figures yesterday afternoon, estimating an 8+ million-barrel build in crude oil inventory across the country. Gasoline and diesel stocks are estimated to have dropped by 3.2 and .5 million barrels last week, respectively. The official report from the Department of Energy is due out at its regular time this morning (9:30 CST).

OPEC’n’friends are rumored to be considering extending their voluntary production cuts into Q2 of this year in an effort to buoy market prices. These output reductions, reaching back to late 2022, are aimed at paring back global supply by about 2.2 million barrels per day and maintaining a price floor. On the flip side, knowledge of the suspended-yet-available production capacity and record US output is keeping a lid on prices.

How long can they keep it up? While the cartel’s de facto leader (Saudi Arabia) may be financially robust enough to sustain itself through reduced output indefinitely, that isn’t the case for other member countries. Late last year Angola announced it will be leaving OPEC, freeing itself to produce and market its oil as it wishes. This marks the fourth membership suspension over the past decade (Indonesia 2016, Qatar 2019, Ecuador 2020).

The spot price for Henry Hub natural gas hit a record low, exchanging hands for an average of $1.50 per MMBtu yesterday. A rise in production over the course of 2023 and above average temperatures this winter have pressured the benchmark to a price not seen in its 27-year history, much to Russia’s chagrin.

Click here to download a PDF of today's TACenergy Market Talk.