A Sell-Off In Equity Markets Seems To Be Outweighing Supply Concerns Again To Start The Week

Market TalkMonday, Jan 24 2022
Pivotal Week For Price Action

A sell-off in equity markets seems to be outweighing supply concerns again to start the week as energy contracts have turned from 2 cent gains overnight to 2 cent losses this morning as US equities moved deeper into the red following their worst week since the start of the pandemic.

The pen is mightier than the sword?  The selling seems to be largely driven by expectations that the FED and other central banks are ending the money printing party and will soon raise rates to combat inflation, which for the moment is outweighing concerns that armed conflict may soon disrupt the flow of global energy supplies.

The march to war in the Ukraine seems remains the biggest story with numerous threats to both lives and markets. Read here for a list of possible market impacts expected should the invasion take place. 

The IEA last week made a case that Russia’s withholding of natural gas had more to do with the price spike last year than the conversion to lower carbon fuel alternatives, and urged the world to learn a lesson from this, highlighting the growing threat from limited lithium supplies as EV’s gain market share.

Meanwhile, the existing war between Arab nations and Houthi rebels continues to add another level of concern as another missile attack on the UAE this weekend reminded the world that some of the largest oil producers are still trying to kill each other. 

Money managers continue to add to their bets on higher petroleum prices with 4 of the big 5 contracts all seeing net length held by the large speculative trade category increase again last week. Reuters’ John Kemp argues that chronically low inventories are encouraging these bets on higher prices, which suggests they may continue for some time. (see the Commitment of Traders Report table & charts below)

Baker Hughes reported a net decrease of 1 active oil rig working in the US last week, the first weekly decline since October. The EIA on Friday reported that its forecasts suggests oil and natural gas output in the US should continue to grow and reach record highs next year.

Today’s interesting read, from the WSJ: The flaws in CAFÉ standards that will continue contributing to strong fuel demand.

Click here to download a PDF of today's TACenergy Market Talk.

Market Talk Update 1.24.22

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Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

Click here to download a PDF of today's TACenergy Market Talk.

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Market TalkTuesday, Mar 26 2024

Refined Products Seeing Small Losses Of Around A Penny While Crude Oil Contracts Hover Just Above Break Even

Energy futures are taking a breather to start Tuesday’s trading, with refined products seeing small losses of around a penny while crude oil contracts hover just above break even.

No new news on either the Red Sea shipping or Russian Refining attacks this morning, so Cocoa prices seem to be taking over the commodity headlines while energy markets wait on their next big move.

RBOB gasoline futures set a new 6-month high Monday at $2.7711, which leaves the door open on the weekly charts for the spring rally to continue. A run at the $3 mark is certainly possible in the next few weeks before the typical seasonal price peak is set just before the start of driving season.

A container ship lost power and crashed into the Francis Scott Key bridge in Baltimore this morning, causing a devastating collapse. While cargo shipping into the area will no doubt be impacted by this event, fuel supplies are unlikely to see any notable change since the 9 fuel terminals in Baltimore are primarily supplied by Colonial pipeline. Barges from Philadelphia refineries do supplement Baltimore supplies at times, and those vessel flows will be impacted at least until rescue operations are completed and the bridge sections removed from the waterway. That said, since shipping up from the Gulf Coast via Colonial is generally cheaper than shipping an NY Harbor-priced barrel south, the amount of supply disrupted by this event will be minimal.

While we’re still waiting on the official forecasts for the Atlantic Hurricane season, early reports continue to suggest that we could be in for a very busy year due to warm water temperatures and a forming La Nina pattern.

Dallas meanwhile is preparing for a different sort of disruption, with city officials encouraging companies to let employees work from home during the solar eclipse on April 8th as metroplex traffic is expected to surge. While some isolated fuel outages are certainly possible if people start panic buying gasoline they don’t need, there’s no reason to expect any widespread impact from the demand spike.

Today’s interesting read: Why AI requires a staggering amount of electricity and may create supply competition for EVs that will end up benefitting fossil fuels.

Click here to download a PDF of today's TACenergy Market Talk.