Baker Hughes Reported Another Drop In The US Oil Rig Count Last Week
Energy markets are mixed to start the week, with ULSD trying to move higher for a 2nd day, while gasoline and crude oil prices hold just below breakeven in the early going. Friday’s big recovery rally fizzled in the last hour of trading and prices failed to threaten the downward sloping trend-lines on the weekly charts, which sets up the chance for another sizeable price drop in the coming weeks if we don’t see a sustained rally soon.
Baker Hughes reported another drop in the US oil rig count last week, with a net decrease of 2 rigs, bringing the total to the lowest level since January 2022. Natural gas rigs held at 118 last week and have been essentially unchanged since early September. A Reuters article Friday suggests that oilfield services companies are preparing for a rough patch in the months ahead with little hope for an increase in drilling rates.
The Commitments of Traders weekly report data is delayed until this afternoon due to the Federal Government sort of recognizing Veteran’s Day on Friday. It seems highly likely that we were watching some heavy liquidation by money managers during last week’s sell-off, but since that report is compiled with positions from Tuesday, we may not see the full picture of what happened until the next report on Friday afternoon.
OPEC officials tend to agree with that expectation, citing speculators for the recent drop in oil prices in its monthly oil market outlook, while holding their demand forecast for steady growth in 2024. The report specifically highlights Chinese crude imports as a driver of the strength in oil demand, despite “overblown negative sentiment” about economic activity in the world’s largest importer. OPEC officials also cited strong demand in the US, with a resurgence in airline traffic the key driver, while vehicle miles traveled is also showing signs of strength.
OPEC’s oil production ticked higher by 80mb/day during October, the 2nd month of increased production, as gains in Iran (who the US continues to allow to bypass sanctions) and Angola offset declines in Saudi Arabia and Kuwait.
While Accuweather declared an early end to the Atlantic hurricane season last week, the NHC is giving 60% odds of a new system developing in the Caribbean this week. Early forecasts suggest that it’s unlikely this storm will develop into a threat for the US, but it could add moisture to a cold front heading towards the East Coast at the end of the week.
Click here to download a PDF of today's TACenergy Market Talk.
Latest Posts
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
After Another Black Friday Selloff Pushed Energy Futures Sharply Lower In Last Week’s Holiday-Shortened Trading
Week 47 - US DOE Inventory Recap
Energy Prices Were Seeing Some Modest Selling Overnight Following A Cease-Fire Agreement Between Israel And Hamas
Social Media
News & Views
View AllValues For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.
After Another Black Friday Selloff Pushed Energy Futures Sharply Lower In Last Week’s Holiday-Shortened Trading
After another Black Friday selloff pushed energy futures sharply lower in last week’s Holiday-shortened trading, we’re seeing a modest bounce this morning. Since spot markets weren’t assessed Thursday or Friday, the net change for prices since Wednesday’s settlement is still down more than 6-cents for gasoline and almost 5-cents for diesel at the moment.
OPEC members are rumored to be nearing a compromise agreement that would allow African producers a higher output quota. Disagreement over that plan was blamed on the cartel delaying its meeting by 4-days last week which contributed to the heavy selling. The bigger problem may come from Russia, who announced plans last week to increase its oil output once its voluntary cut agreement ends now that price cap mechanisms are proving to be ineffective.
While an uneasy truce in Gaza held over the weekend, tensions on the Red Sea continued to escalate with the US Navy intervening to stop another hijacking and being rewarded for its efforts by having missiles fired at one of its ships.
RIN values came under heavy selling pressure Wednesday afternoon following a court overturning the EPA’s ruling to deny small refinery hardship waivers to the RFS. Those exemptions were a big reason we saw RINs drop sharply under the previous administration, and RINs were already on due to the rapid influx of RD supply this year.
More bad news for the food to fuel lobby: the White House is reportedly stalling plans to allow E15 blending year-round after conflicting studies about ethanol’s ability to actually lower carbon emissions, and fuel prices. Spot prices for ethanol in Chicago reached a 2.5 year low just ahead of the holiday.
Baker Hughes reported the US oil rig count held steady at 500 active rigs last week, while natural gas rigs increased by 3.
The first of perhaps several refining casualties caused by the rapid increase in new capacity over the past two years was reported last week. Scotland’s only refinery, which has a capacity of 150mb/day is preparing to shutter in 2025.
The CFTC’s commitment of traders report was delayed due to the holiday and will be released this afternoon.
Click here to download a PDF of today's TACenergy Market Talk.