Rumors That Beijing Will Ease Restrictive Protocols Seemed Reason Enough For Trader To Push WTI Futures Higher Last Week
Whether or not China will ease its COVID lockdowns are broadly taking credit for the last week of crude oil price action. Rumors that Beijing will ease restrictive protocols seemed reason enough for trader to push WTI futures higher last week, while the news over the weekend that the status quo will be maintained for now has oil prices sinking modestly to start today. Both American and European oil futures are trading down .6% this morning.
Good news for our friends across the pond: warmer-than-expected temperatures are forecast for the next couple of weeks and are expected to dampen natural gas and heating oil demand. While that may mean good news for Europeans using those products to heat their homes, distillate prices in the New York Harbor market are still seeing premiums approaching $1 per gallon over the prompt month futures contract. It doesn’t look like the Northeast will see any price relief on diesel and/or heating oil until the trans-Atlantic arbitrage window has closed.
Open interest in WTI crude oil futures was the only one that rose last week and traders continued to shy away from participating in energy markets to the extent we’ve grown accustomed to over the past few years. The mix of ‘who thinks the markets’ going where’ shifted however, with the “smart” money increasing their net long positions in crude oil futures, increasing their bets on higher prices.
Tropical Storm Nicole is currently churning just west of the Bahamas, and is expected to make landfall on Florida’s east coast early Thursday morning. The NHC graphic currently shows Nicole maintaining it’s storm status ahead of its mainland impact, but mentions that there is a possibility for it to develop into a Hurricane before hitting the Bahamas. Regardless of what we call it, heavy rains, coastal flooding, and strong winds are all expected along the storm’s path. Impact to US energy infrastructure is expected to be minimal at this time.
Click here to download a PDF of today's TACenergy Market Talk.
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Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
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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.