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

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Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures

The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.

The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.

We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.

The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.

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

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day

The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.

There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.

As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.

Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.

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