Multiple Equity Indices Holding At All-Time Highs
Energy futures continue to hold near multi-year highs, and multiple equity indices are holding at all-time highs as recovery optimism fueled by increasing jobs & manufacturing data seems to be edging out concerns about new travel restrictions keeping the upward trend lines intact for both asset classes.
It’s the last (trading) day of June, ending the second quarter and the first half of the year. It’s been another strong month for energy contracts (marking a seventh month of increases out of the last 8) with most blowing away pre-COVID price highs and trading to levels last seen in 2018 or earlier.
Most cash markets have already flipped to trading vs August futures, but for the remainder, make sure to watch the RBQ & HOQ contracts today as the expiring July (RBN/HON) contracts have minimal liquidity. As of this writing the last trade for both July contracts is nearly a penny/gallon lower than that for the august contracts, and the July Heating Oil hasn’t had a trade in more than an hour.
The API reported a large drop in oil inventories of more than 8 million barrels last week, while refined products had modest builds of 2.4 million barrels for gasoline and 428k barrels for distillates. The EIA’s version of the weekly data is due out at its normal time this morning.
The second tropical system churning across the Atlantic is given 80% odds of development as it moves towards the Caribbean, and will need to be watched next week since there’s still a chance it could make it to the Gulf of Mexico. While the first system being tracked by the NHC is only given 10% odds, it may act like a lead blocker for the second storm and provide a favorable atmosphere for development. The 3 systems on the map this week are more typical of August than June according to one expert, and makes this non-expert a little hesitant to think of what August (and September) might look like.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllThe 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.
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.