Energy And Equity Markets Are Both Starting The Week In The Red

Market TalkMonday, Apr 11 2022
Pivotal Week For Price Action

Energy and equity markets are both starting the week in the red as fears of FED’s inflation fighting and the fallout over China’s COVID lockdown are both getting credit for the latest round of selling after Friday’s big price bounce. 

The heavy wave of selling puts the energy complex at the low end of its recent trading range, and threatens the weekly bullish trend line, but there’s still more room to fall before chart support is actually broken. Peg last Thursday’s low trades as the first test near term for refined products. RBOB came within ½ cent of that low this morning before bouncing by 3 cents, while ULSD futures are still trading 6 cents higher than the lows we saw just a few days ago. 

The housing market is already seeing the plan for higher rates having a cooling effect on prices, and that same phenomenon is probably influencing other commodity markets as well, which really is exactly what the FED is trying to have happen. 

While China is reporting no new COVID deaths during the Shanghai lockdown, there are reports that refineries will be forced to cut runs and/or increase export volumes to manage the rapid decline in regional demand. 

Money managers continued to trim their net length in most energy contracts last week, with only ULSD seeing a net increase. Open interest for ULSD continues to plummet as the surge in volatility we saw in March was apparently too much to handle for many participants. 

A financial times article notes how the chaotic markets, and the increased margin calls that come with them, may explain why we’re seeing the reduction in liquidity and more volume flowing to the major commodity trading houses. This phenomenon hasn’t gone unnoticed in Ukraine, whose President reached out to the 4 largest trading houses at the end of March to ask they stop facilitating the flows of Russian exports.

“There’s a general concern across the marketplace that we’re losing participation,” he said.

Baker Hughes reported an increase of 11 oil rigs and 3 natural gas rigs drilling in the US last week. The record amount of workers hired reported in the Texas oil patch in February seems to be hitting the ground as the Permian added 9 rigs, and the state accounted for 12 of the 14 total rigs added last week. Still, despite the big weekly increase, the Permian has about 90 fewer active rigs now than it did pre-COVID, and the total US count is still down about 140.

Read this Rystad Energy report on why the SPR releases announced last week will only have a temporary impact on prices. 

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

Market Talk Update 4.11.22

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Pivotal Week For Price Action
Market TalkMonday, Oct 2 2023

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.