Oil Futures Spiked Sunday Night

Market TalkMonday, Oct 15 2018
Oil Futures Spiked Sunday Night

Oil futures spiked Sunday night when trading resumed as tensions between Saudi Arabia and the US – 2 of the 3 largest oil producers in the world – created concerns for global supplies. Most of those gains have evaporated this morning after a tweet from the US President suggesting cooler heads may prevail.

US drillers put 8 more rigs to work last week according to Baker Hughes’ weekly rig count. The Permian basin accounted for half the move on the week (fitting given that basin accounts for 56% of the total US rig count) as drilling activity nears its highest level in 4 years, to match the 4 year highs in oil prices.

Money managers cut their net-long holdings in WTI to the lowest level of the year last week, reducing bets that oil prices would continue to climb. Brent and ULSD net-length held by the big speculator category were also reduced modestly, while RBOB saw another small increase. Given the data for these COT reports is gathered as of Tuesday – before the big sell-offs we saw on Wednesday and Thursday – it seems likely that we may see a big move lower in these holdings in this week’s report.

Repairs to Enbridge’s natural gas pipeline that had an explosion last week may take weeks, although PNW area refineries seem to be able to continue operations via alternate nat gas supplies. Spot prices for gasoline in the region remain 50 cents above NYMEX futures.

There’s still no definitive word to be found on how long the Irving Oil refinery may be down due to the explosion and fire that shuttered the plant last week, but the lack of reaction in the NYH spot market suggests traders aren’t too worried about an extended outage.

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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.

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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.