Seeing A Seventh Day Of Heavy Selling
We’re seeing a 7th straight day of heavy selling in energy futures, a streak that’s knocked 28 cents off of gasoline prices, and 18 cents for diesel after the bull trend that lasted nearly 9 months finally broke. The volume and consistency of the selling suggests that we’re witnessing a strong liquidation from large speculators who had recently increased their bets on higher prices to multi-year highs, and are now licking their wounds.
Next stop on the charts looks to be the March lows some 10-15 cents below current values, but it’s rare for these contracts to go 1 direction this long so there’s a good chance we could see a bounce before the downtrend continues. It’s worth noting that the October RBOB contract, which is winter-grade, already traded down to within 30 points of the March lows this morning.
What about Bob? It’s been 30 years since a Hurricane hit New England, and it looks like Henri is going to be the latest since Bob to do so. Current models have the storm making a direct hit on Providence RI Sunday afternoon as a category 1 storm. Expect port traffic to start being impacted Saturday unless the storm’s path shifts back out to sea today. The big question for fuel supply will be if any of the terminals in the area sustain major damage, and you can expect terminal operators to shut down loading well ahead of landfall to preserve tank integrity by keeping the inventory in those tanks, if the current path holds. If terminals can avoid infrastructure damage this event will probably disrupt supply for a couple of days, not a couple of weeks. Side note for historians (or Mark Wahlberg fans) 1991 not only brought the region’s last hurricane landfall, it also brought the Perfect Storm later that year.
After lagging the action for the early days of the selloff, RINs decided to make up some ground in a hurry the past 2 days, dropping nearly 10 cents in Thursday’s session, and falling another 10 cents already this morning. Usually when we see this big of a move in RINs, there’s a story from Washington about a change in the RFS driving the action. Not this time. Instead there was talk in the market that a large refiner that would normally be a RIN buyer was suddenly selling large quantities of RINs, helping to drive the big drop. In a separate story, Marathon announced it was partnering with ADM to provide feedstocks for the company’s increasing number renewable diesel production facilities.
Click here to download a PDF of today's TACenergy Market Talk.
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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.