WTI Futures Are Leading The Way Higher This Morning, Tacking On 1.2% Gains To Start This Week’s Trading
WTI futures are leading the way higher this morning, tacking on 1.2% gains to start this week’s trading. Gasoline futures are trailing slightly, trading higher in what seems like sympathy, adding gains of just over a penny so far today. ULSD is the odd man out of the ‘big three’ energy futures contracts, trading lower by about .3%.
Recovery in Chinese oil demand seems to be taking credit for today’s gains, as cited by oil journalists and the Energy Information Administration alike. While there is still questions surrounding the stickiness of Eastern demand growth, the prospect of tightness is oil supply due to OPEC+ production cuts seems to be widely accepted and a main driver for the crude oil rally we’ve seen over the last three months.
Tropical Storm Lee made landfall west of Halifax, flooding areas of Nova Scotia and claiming a life. While the US Northeast was hit with near-hurricane strength winds and torrential rain, the largest impact to energy infrastructure is at Irving’s New Brunswick refinery, which was forced to close two of it’s catcrackers over the weekend.
Money managers continued piling into WTI contracts as prices broke $90 for the first time in a year last week. Speculators also added length in Brent crude and RBOB, but trimmed their length in ULSD and Gasoil contracts.
Baker Hughes reported an increase of 2 oil production platforms in the US last week, while natural gas rigs jumped a sizeable 8 on the week, bringing the accuracy of the previous months-long decline into question.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllThe 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.