U.S. President Tests Positive For COVID-19
Big red numbers are flashing across energy and equity markets after the U.S. President and first lady announced they’d tested positive for COVID-19 late Thursday night. Financial markets were already jittery this week over the potential negative economic impacts of climbing case counts and an ugly election season, and this news just creates more uncertainty in both areas.
The early wave of selling in petroleum futures sets up a test of the mid-September lows around $1.06-$1.07 for RBOB and ULSD. If prices can hold support, this is likely to be remembered as nothing more than the latest crazy news story in the craziest year any of us can remember. If prices break through that support however, we might look back at this as the catalyst that finally broke the complex out of its four-month-old sideways trading pattern and sent product prices on another extended trip below $1/gallon.
September’s payroll report showed another month of strong job growth in the U.S. as the COVID economic recovery continues. 661,000 jobs were estimated to be added during the month, which took the headline unemployment rate down ½ % to 7.9% while the U-6 rate dropped by 1.4% to 12.8%. Those numbers are good, but still highlight the long road to recovery for the U.S. economy that lays ahead, and were largely ignored based on the lack of price reaction as traders seem preoccupied with the other news of the day.
That storm system that had been churning in the Caribbean for the past week is now given 90% odds of developing into Tropical Storm Gamma by the weekend according to the NHC. It’s still too soon to say where it will go from there, but it’s likely to enter the Gulf of Mexico next week and yet another Gulf Coast hit is a possibility at this point. An EIA note this morning highlights how Hurricane Laura impacted crude production in the Gulf more than any storm since 2008. The Lake Charles refineries are still trying to recover from Laura’s direct hit, and the last thing they need right now is yet another storm system to complicate those efforts.
Today’s interesting read: A Bloomberg article detailing how JP Morgan manipulated metals and treasury markets, and how they got caught. While this was the big fish caught by the CFTC recently, numerous other announcements in the past week show that the agency has its hands full dealing with other bad actors across numerous markets.
Click here to download a PDF of today's TACenergy Market Talk.
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
Energy Futures Are Drifting Quietly Higher This Morning
Refined Products Holding Close To Break Even While Oil Prices Are Losing Just Under 1%
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
The energy complex is trading modestly lower so far this morning with WTI crude oil futures leading the way, exchanging hands $1.50 per barrel lower (-1.9%) than Tuesday’s settlement price. Gasoline and diesel futures are following suit, dropping .0390 and .0280 per gallon, respectively.
A surprise crude oil build (one that doesn’t include any changes to the SPR) as reported by the American Petroleum Institute late Tuesday is taking credit for the bearish trading seen this morning. The Institute estimated an increase in crude inventories of ~5 million barrels and drop in both refined product stocks of 1.5-2.2 million barrels for the week ending April 26. The Department of Energy’s official report is due out at it’s regular time (9:30 CDT) this morning.
The Senate Budget Committee is scheduled to hold a hearing at 9:00 AM EST this morning regarding a years-long probe into climate change messaging from big oil companies. Following a 3-year investigation, Senate and House Democrats released their final report yesterday alleging major oil companies have internally recognized the impacts of fossil fuels on the climate since as far back as the 1960s, while privately lobbying against climate legislation and publicly presenting a narrative that undermines a connection between the two. Whether this will have a tangible effect on policy or is just the latest announcement in an election-yeardeluge is yet to be seen.
Speaking of deluge, another drone attack was launched against Russian infrastructure earlier this morning, causing an explosion and subsequent fire at Rosneft’s Ryazan refinery. While likely a response to the five killed from Russian missile strikes in Odesa and Kharkiv, Kyiv has yet to officially claim responsibility for the attack that successfully struck state infrastructure just 130 miles from Moscow.
The crude oil bears are on a tear this past week, blowing past WTI’s 5 and 10 day moving averages on Monday and opening below it’s 50-day MA this morning. The $80 level is likely a key resistance level, below which the path is open for the American oil benchmark to drop to the $75 level in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Energy Futures Are Drifting Quietly Higher This Morning
Energy futures are drifting quietly higher this morning as a new round of hostage negotiations between Israel and Hamas seem to show relative promise. It seems the market is focusing on the prospect of cooler heads prevailing, rather than the pervasive rocket/drone exchanges, the latest of which took place over Israel’s northern border.
A warmer-than-expected winter depressed diesel demand and, likewise, distillate refinery margins, which has dropped to its lowest level since the beginning of 2022. The ULSD forward curve has shifted into contango (carry) over the past month as traders seek to store their diesel inventories and hope for a pickup in demand, domestic or otherwise.
The DOE announced it had continued rebuilding it’s Strategic Petroleum Reserve this month, noting the addition of 2.3 million barrels of crude so far in April. Depending on what the private sector reported for last week, Wednesday’s DOE report may put current national crude oil inventories (include those of the SPR) above the year’s previous levels, something we haven’t seen since April of 2022, two months after Ukraine war began.
The latest in the Dangote Refinery Saga: Credit stall-out, rising oil prices, and currency exchange.
Click here to download a PDF of today's TACenergy Market Talk.