Wheels Come Off Energy Bus

Market TalkThursday, Nov 1 2018
Wheels Come Off Energy Bus

The wheels came off the energy bus to end October trading with a heavy wave of selling pushing most of the complex to new lows for the month despite another rally in stocks. The weak finish left behind a bearish outside-down reversal bar on the monthly charts, which suggests more selling may be coming soon, and offered little hope to those waiting for the buyers to step in.

The timing of the sell-off was a bit curious as the liquidation really didn’t get going until the last hour of trading, suggesting it wasn’t a DOE-Inventory-inspired move. Given the move just moments before trading halted for the month, it seems this latest move may be the latest sign that the big funds that contributed heavily to the rally in oil prices over the past 18 months may have decided to take their ball to a different game.

Bearish Notes from the DOE report: US Oil stocks continue to build, and US Oil production made it back to its record high of 11.2 million barrels/day last week, after a 2 week drop owing to precautionary evacuations of oil rigs ahead of Hurricane Michael.

Bullish Notes: Total US petroleum demand held above the 5-year range for this time of year for a 2nd consecutive week, helping refined product inventories to draw down again. While several industry veterans continue to suggest that the DOE’s demand estimates are inflated by export calculations, the fact that demand seems to be holding up in the face of brutal October weather across much of the country is encouraging as we approach the winter doldrums.

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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.

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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.

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