Stock Markets Continue To Bounce Around

Market TalkMonday, May 20 2019
Gasoline And Diesel Contracts Trying To Lead Energy Complex Higher

Reports of extended OPEC production cuts and a war of words between Iran and the US over the weekend have not been enough to sustain an overnight rally in energy prices, as most contracts have now dipped into the red. Stock markets continue to bounce around in a similarly volatile pattern as trade concerns continue to linger.

The OPEC & Friends meeting Sunday brought reports that the cartel would hold its current output cuts in place through the end of the year. The group continues to leave the door open to further adjustments, which makes sense given the high levels of uncertainty surrounding production from Iran, Venezuela, Libya etc.

Just a few days after the US evacuated personnel from Iraq, a rocket was fired on the Green Zone in Baghdad, although no injuries were reported.

Gasoline prices are leading the move lower, as cash markets across the country are signaling that supplies are healing as basis differentials have dropped substantially over the past week in most US spot markets. An initial test for RBOB futures this week will be the $2 mark, which may decide if we test the May lows at $1.92, or if they can make a run back at the April highs of $2.14

Money managers remain cautious in their energy betting with WTI’s managed-money net length declining modestly for a 3rd week, while Brent snapped a 9-week streak of increases with a small reduction in the latest COT report. Speculators remain mixed in refined products as well, with ULSD contracts dropping back to a net-short position held by money managers, while RBOB saw a small increase, and continues to hold near the top end of its seasonal range.

Baker Hughes reported a decline of 3 active oil rigs last week, bringing the US total to its lowest level since March 2018 with 802 active rigs. As has been the case for most of the year, the Permian basin accounted for the majority of the change, 3 rigs being taken offline last in that region, while none of the other major shale plays changed in either direction by more than 1 rig.

The EIA this morning is taking a look at the collapse in Venezuelan oil production, predicting that the country’s output will continue its declines through 2020.

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Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

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.

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

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.

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