Unusual Day For Market Watchers
Are prices up or down today? That depends on your reference point. Today is an unusual day for market watchers in that futures are trading lower (from Friday’s settlement) but since cash markets have been closed from Wednesday, physical prices may still be moving higher from where they left off since futures moved higher over the holiday.
Good news is bad news:
The early selling seems to be in sympathy with stock markets around the world that are reacting negatively to Friday’s strong US Payroll report that estimated 224,000 jobs were added in June, and has traders betting on a less aggressive rate cut by the FED in July. Based on the CME’s FedWatch tool, traders were giving a 100% chance of at least a 25 point cut, and a 20% chance of a 50 point rate cut at this month’s FOMC meeting prior to Friday’s report. This morning, the odds of a 50 point cut have been slashed to zero, which seems to be disappointing stock markets.
Look out below? The National Hurricane center is giving a low pressure system that’s currently moving over Georgia an 80% chance of developing into a tropical system when it dips down into the Gulf of Mexico later this week. While this pattern would be an unusual path for a tropical storm, and the water this time of year may not be warm enough to allow this system to become a large storm, areas of Louisiana and Texas home to numerous refineries have already been dealing with flood waters and may still be at risk.
The EPA published its proposal for 2020 renewable volumes under the RFS on Friday. The proposed volumes include volume growth targets in line with recent years, and the agency once again decided not to reallocate any volumes waived due to small refinery exemptions, which is drawing loud criticism from agricultural groups and presumably less loud praise from refiners.
A little too optimistic? Note in the RFS table below how the original statute assumed that by 2020 the US would be producing more than 10 billion gallons of cellulosic ethanol, which is half of what the total combined renewable fuel consumption will actually be next year, and some 20 times the expected actual production of cellulosic fuel.
The CFTC commitment of traders reports are delayed due to the Holiday, but ICE published figures last week that showed money managers reduced their net long holdings in Brent for an 8th straight week.
Baker Hughes reported that 5 oil rigs were taken off-line last week, wiping out the gains of the previous two weekly reports. The Woodford basin in Oklahoma accounted for most of the decline last week, after posting the largest increases the past two weeks.
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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.