WTI And RBOB Futures Reach Highest Levels Since 2014
WTI and RBOB futures both reached their highest levels since 2014 overnight as a lack of unity from OPEC & Friends, an influx of investor money, and another renewable fuel court ruling, all seem to be helping push prices higher. Prices have pulled back since reaching those highs however, and there are some warning signals that a pullback may be coming soon.
OPEC & Friends failed for a third time to come up with an agreement on Monday as the UAE continues to act as a roadblock. While the market has reacted with higher prices following this news, it could in fact end up being bearish, as the fragile alliance was preventing too much supply hitting the market and without it, countries may overproduce to take advantage of prices trading at multi-year highs.
Tropical Storm Elsa is making its way across the Florida keys this morning, with winds around 60 miles an hour. The Storm is expected to pass near the port of Tampa overnight and make landfall sometime Wednesday. The path keeps the storm far away from any refineries or off shore production so should not a non-factor for supply.
Money managers continued their recent trend of increasing net length (bets on higher prices for refined products, but reducing them for Crude oil. RBOB gasoline contracts led the buying last week as the large speculative trader category increased their long positions by 10%, jumping on the high gasoline price bandwagon as prices reached 7 year highs.
Baker Hughes reported 3 more oil rigs were put to work last week. That puts the total U.S. oil rig count up 191 from a year ago, when prices were fighting to get back to $40 per barrel. Then again, the rig count is 412 less than it was 2 years ago, when prices were around $56, nearly $20/barrel less than where they are trading today.
RINs had another choppy session on Friday, starting the day under more selling pressure only to rally in the afternoon following a court ruling that invalidated E15 sales in the summer time. While E15 has had a hard time catching on outside of the Midwest, it does take another blending option off the table and reduce the availability of RINs to meet RFS obligations. Due to the early selling in RINs we saw Friday, the nickel move higher in values won’t show up until tonight’s assessment.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllGasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading
Gasoline futures are leading the energy complex higher this morning with 1.5% gains so far in pre-market trading. Heating oil futures are following close behind, exchanging hands 4.5 cents higher than Friday’s settlement (↑1.3%) while American and European crude oil futures trade modestly higher in sympathy.
The world’s largest oil cartel is scheduled to meet this Wednesday but is unlikely they will alter their supply cuts regimen. The months-long rally in oil prices, however, has some thinking Saudi Arabia might being to ease their incremental, voluntary supply cuts.
Tropical storm Rina has dissolved over the weekend, leaving the relatively tenured Philippe the sole point of focus in the Atlantic storm basin. While he is expected to strengthen into a hurricane by the end of this week, most projections keep Philippe out to sea, with a non-zero percent chance he makes landfall in Nova Scotia or Maine.
Unsurprisingly the CFTC reported a 6.8% increase in money manager net positions in WTI futures last week as speculative bettors piled on their bullish bets. While $100 oil is being shoutedfromeveryrooftop, we’ve yet to see that conviction on the charts: open interest on WTI futures is far below that of the last ~7 years.
Click here to download a PDF of today's TACenergy Market Talk.
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.