Refined Products Are Leading The Charge Higher This Morning With 5.5 Cent Gains
Up, up and away? Energy futures have staged a big rally off of Monday’s lows and several contracts are now within a few ticks of reaching fresh 7 year highs. Refined products are leading the charge higher this morning, with 5.5 cent gains putting ULSD just 16 points away from its highest trade since October 2014 and threatening another technical breakout to the upside. Brent crude meanwhile is just a few ticks below the $90 mark, already reaching a fresh high for the year overnight.
Looking at the charts, if we see new highs set and held this week, there’s a strong case to be made for crude making a run at $100, and ULSD taking a shot at $3. Fundamentally, as long as OPEC and Friends are unable to meet their output quotas, the argument for that type of price spike continues to strengthen as well.
The FED and Ukraine continue to be the big stories roiling markets, with US equities having more huge swings in Tuesday’s session, and starting out Wednesday pointing to healthy gains, while volatility is at its highest for stocks in over a year.
The FOMC will make their first monetary policy decision of what’s expected to be a very busy year for the FED. The CME’s Fedwatch tool shows only a 5% probability of a rate hike today, but a 97% chance of an increase by March. In addition, the probability of 3 or more hikes by the end of the year has increased to 92%, from 65% a month ago as the FED has been foreshadowing a tougher stance on inflation.
The API reportedly estimated a small decline in crude oil stocks last week of less than 1 million barrels, while distillates drew down by 2.2 million barrels. Gasoline meanwhile continued its seasonal stock build with an increase of 2.4 million barrels, marking the 4th straight week of gains. The EIA report is due out at its normal time today, and if the seasonal trend holds we should continue to see gasoline stocks increasing for another few weeks before starting to draw down ahead of the spring RVP transition.
How’s that plan working out? The DOE last week announced the 2nd largest award ever from the SPR as 7 companies raced to take advantage of the steeply backwardated price curve and gladly pay the government back in 2-3 years where they can lock in prices 20% or more lower than what they’re receiving today, which should easily cover the “interest” payable on those loans. Meanwhile, energy products continue to push multi-year highs despite the political theater of this coordinated SPR release that was supposed to help lower prices.
Click here to download a PDF of today's TACenergy Market Talk.
Latest Posts
Gasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading
The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
Week 39 - US DOE Inventory Recap
Social Media
News & Views
View AllGasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading
Gasoline futures are leading the energy complex higher this morning with 1.5% gains so far in pre-market trading. Heating oil futures are following close behind, exchanging hands 4.5 cents higher than Friday’s settlement (↑1.3%) while American and European crude oil futures trade modestly higher in sympathy.
The world’s largest oil cartel is scheduled to meet this Wednesday but is unlikely they will alter their supply cuts regimen. The months-long rally in oil prices, however, has some thinking Saudi Arabia might being to ease their incremental, voluntary supply cuts.
Tropical storm Rina has dissolved over the weekend, leaving the relatively tenured Philippe the sole point of focus in the Atlantic storm basin. While he is expected to strengthen into a hurricane by the end of this week, most projections keep Philippe out to sea, with a non-zero percent chance he makes landfall in Nova Scotia or Maine.
Unsurprisingly the CFTC reported a 6.8% increase in money manager net positions in WTI futures last week as speculative bettors piled on their bullish bets. While $100 oil is being shoutedfromeveryrooftop, we’ve yet to see that conviction on the charts: open interest on WTI futures is far below that of the last ~7 years.
Click here to download a PDF of today's TACenergy Market Talk.
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.
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.