Cocktail Of Bullish Headlines Push Markets Higher
Optimism abounds this week as a cocktail of bullish headlines push energy and equity markets higher for a third day. Markets around the world cheer improving COVID stats, the official approval of a vaccine, the reopening of the world’s 3rd largest port, and energy markets are getting an added boost from inventory declines and another hurricane threat.
While this 3 day rally, that’s added 20 cents or more from Friday’s lows, has taken the chance of a technical collapse off the table near term, there’s still work to be done to eliminate the longer threat of a lower trend. Peg the starting levels of the 7 day selloff as the targets we’ll need to see broken if the bulls want to take back control longer term. RBOB futures will transition to the winter grade spec next week, which will knock 13 cents off of prompt values. If you’re wondering why gasoline basis values in your local market suddenly jumped in the past couple of days, odds are physical trades in your region are now referencing the October RBOB contract.
It looks like there’s a good chance we could see a hurricane heading towards the US Gulf Coast next week. The storm system in the Caribbean that was given just 20% odds of development a few days ago, now has 80% odds of developing and early models have it pointed anywhere from Northern Mexico to Corpus Christi, Houston, or perhaps even Louisiana as we mark the 4 year anniversary of Hurricane Harvey. The name of this storm, assuming it develops, will likely be Ida, but could be Julian if one of the other 2 storms churning over the Atlantic is named first. Neither of those appears to be a threat to the US at this point.
It’s another week of small changes from the API report, which was said to show inventory drawdowns across the board last week. Crude oil inventory dropped by 1.6 million barrels, gasoline was down almost 1 million barrels, and distillates dropped by 245,000 barrels. The DOE’s weekly report is due out at its normal time today.
Add another renewable diesel project to the pile: Exxon’s subsidiary Imperial oil announced a new plan to co-produce renewable diesel at its refinery in Edmonton, expanding the company’s strategy of co-producing rather than converting its existing facilities as we’ve seen other refiners do. Canada’s Clean Fuel Standard takes effect next year, giving more financial incentive for this type of investment, and adding to the competition for feedstocks and renewable products that’s pulling traditional biodiesel away from the US markets that don’t have a credit program to offset the higher costs of those fuels.
Speaking of which, after RINs got hammered last week when reports suggested the EPA was going to lower its RFS target for 2021, and raise it for 2022, we’re seeing values gap higher this morning, with trades already 18 cents above Monday’s lows. With this type of move, odds are we’ll see another update on the EPA’s plans (or lack of) later this morning.
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 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.