Complex Continues To Move Sideways

Market TalkWednesday, Feb 6 2019
Petroleum Complex Selling Off

Energy futures are slipping for a 3rd straight day, but are not threatening Friday’s low trades, as the complex continues to move sideways, languishing through the winter doldrums stuck in technical-trading purgatory.

The API was said to show inventory builds across the board last week, albeit relatively minor in size. Crude oil stocks were reported to increase about 2.5 million barrels, gasoline inventories were up 1.7 million, while diesel stocks increased by around 140,000 barrels.

The EIA’s version of weekly stats is due out at its regular time. Last week’s big number was the large drop in refinery run rates. With numerous unplanned outages reported since that time, there could be another large decline today. In addition to the weather-related events of the past week, there are reports the multiple refineries in the midcontinent may be moving up their maintenance schedules previously planned for later in 2019, betting that it’s better to shut units now when margins are soft, than later in the year when many expect a prices could surge as the 2020 IMO deadline approaches.

There are still more questions than answers on how the chaos in Venezuela will play out. The story of the past 24 hours has been the count of oil tankers idling off the coast, stranded by the uncertainty.

Several reports are claiming that OPEC is attempting to formalize its cooperation with Russia and the other oil producing countries that have come to terms on production cuts to prop up prices over the past 2 years. At this point, it appears that the Russians aren’t cooperating. Shocking.

The CFTC issued the 2nd “catch up” commitments of traders report Tuesday, showing that money managers (aka hedge funds, aka large speculators) were still cautious about betting on oil and refined products in the last week of 2018. Considering the meltdown they’d just lived through on Christmas eve, it’s hard to blame them. Then again, based on the price rally, and 4 straight weeks of new speculative length additions in Brent that we’ve seen, it seems like a foregone conclusion that the adrenaline junkies who are “managing” money have increased their bets in 2019.

One other item to watch in the COT reports: Swap positions (a proxy for producer hedging in WTI) reached a 15 month low at year-end. There have been concerns that hedge funds leaving the oil market may make forward hedging more challenging for producers, and that’s one place we should be able to figure out whether or not that’s true.

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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.

Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

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.

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

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.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.