A Strong Start And Weak Finish Sets The Stage
A strong start and weak finish Tuesday set the stage for a technical selloff in both energy and equity markets, as the recent bull rally seemed to run out of steam. Reversal bars on the daily charts after WTI flirted with a five-month-high and the S&P 500 came close to a new record high only to end lower on the day, suggested we may be due for a heavy round of selling. Instead, both asset classes are moving higher again to start Wednesday’s session, with bullish inventory figures seeming to help NYMEX futures erase yesterday’s losses and diminish the technical threat.
The API was said to report inventory draws across the board last week, with crude stocks down 4.4 million barrels, diesel down 2.9 million barrels and gasoline lower by 1.3 million barrels. The DOE’s weekly report will be out at its normal time this morning.
Any bullish sentiment from the weekly inventory data is being held in check by more bearish outlooks from the EIA and OPEC monthly reports.
OPEC’s monthly oil market report lowered expectations for global economic activity and oil demand, while increasing its forecast for supplies. OPEC’s production increased by nearly one million barrels/day on the month as the carte’s output cut agreements started to ease. The report also noted the lack of investment flows into the oil markets in recent months, while Gold and other commodities have seen record setting action.
The EIA’s Short term energy outlook painted an uncertain picture, as it has the past several months, and noted how July prices stagnated as the demand recovery battled to a stalemate with the threat of additional COVID shutdowns.
The August report used a smaller reduction in U.S. GDP than the July report, but despite that relative improvement, the forecast suggests that U.S. energy consumption in 2021 will still be lower than in 2019, as the COVID recovery is expected to stretch further into the future.
One notable item from the report is that the price curve for Oman crude flipped from backwardation to contango in the last two weeks of July, suggesting that Asian refinery runs – particularly in China – have slowed, while Middle Eastern production comes back online.
The latest in a long line of renewable diesel projects planned for 2022 was announced Tuesday as an alliance that will see ExxonMobil buying the output from the refinery in Bakersfield, CA that’s being retooled for RD production. This is at least the fourth traditional refinery being converted to RD production that’s been discussed in recent weeks, and given the state of environmental rules and weak refinery margins, it’s likely not going to be the last.
Click here to download a PDF of today's TACenergy Market Talk.
Latest Posts
Gasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading
The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
Week 39 - US DOE Inventory Recap
Social Media
News & Views
View All
Gasoline 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.