Small Contract Losses and Gains Start Thanksgiving Week 2019
It’s a mixed start to the week for energy contracts, with WTI and RBOB showing small losses, while Brent and ULSD cling to small gains. Prices remain within striking distance of the high-end of the November trading range, but so far seem unwilling to make the next move with uncertainty over trade talks and the upcoming OPEC meeting both looming.
Money managers made very small additions to their net long holdings of Brent, ULSD and RBOB contracts as of last Tuesday (when the COT data is compiled) and made a slight reduction in their long bets on WTI.
Baker Hughes reported a 5th straight weekly decline in the US oil rig count, to a total of 671 active rigs. Drilling activity according to this measure is approaching a 3 year low, with 206 rigs taken out of service so far in 2019.
Here’s a decent (if biased) read on the state of the renewable fuel standard, that also helps to partially explain why biodiesel RINs are holding near multi-year highs while ethanol RINs are holding near multi-year lows (chart below).
Thanksgiving Holiday Trading Schedule: The CME’s NYMEX contracts will trade in abbreviated sessions both Thursday and Friday this week, with settlements published only for Friday. The major spot market publications will be closed both days so expect the NYMEX volumes to be low most rack prices to carry through the long weekend, although most suppliers will reserve the right to change prices should something exciting happen.
Click here to download a PDF of today's TACenergy Market Talk.
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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.