Pre-Holiday Gains Wiped Out After Post-Holiday Trading

Market TalkMonday, Apr 5 2021
Pivotal Week For Price Action

The rollercoaster ride continues for energy markets as big pre-holiday gains were wiped out in the first few hours of post-holiday trading, only to see refined product prices bounce three cents in the past hour. 

While energy markets continue to swing back and forth, equity markets are pointed sharply higher with the DJIA and S&P 500 both pointing to record highs this morning, celebrating a strong March jobs report, which wasn’t too strong as to encourage the FED to think about raising rates.


OPEC and its allies agreed to a gradual increase in production last week, predicting stronger demand this summer while trying to avoid flooding the market too soon. That announcement was seen as bullish since the cartel was showing restraint and not returning more of its idle capacity to the market even with prices back to pre-COVID highs. 

The U.S. and Iran are returning to the negotiating table, via intermediaries, for the first time in three years. That slight bit of progress is getting some credit for the early wave of selling since it could eventually lead to more Iranian crude hitting the market that’s trapped by sanctions today. 

Baker Hughes reported an increase of 13 drilling rigs last week as the industry continues its slow and steady recovery. Unlike most weeks where the Permian basin accounts for the majority of the drilling activity, last week the gains were spread out across numerous states like Colorado, Utah, Oklahoma, Pennsylvania, and offshore in Louisiana. Even though we’ve seen more than 150 rigs put back to work since the count bottomed out last summer, we’re still roughly 300 rigs shy of where we were pre-COVID, and just over the lowest levels from the previous oil price crash. 

Money managers look like they weren’t enjoying the rollercoaster ride for energy prices, reducing their long and short positions across the board last week. There was more short covering in most contracts causing the net length held by the large speculators  to increase slightly on the week for WTI and Brent. 

There will be plenty of debate in the weeks ahead on the $2 trillion spending bill proposed, particularly around the renewable energy components included. Most of the funds so far seem focused on expanding capacity for renewable electricity generation and transmission, but expect transportation fuels to become part of the debate.  The White House has already reportedly instructed the EPA to review whether fuels used to power EVs could qualify to generate RINs under the RFS, which will no doubt be hotly contested.

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

Market Update (018) 4.5.21

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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.

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.