Energy Futures Are Green Across The Board This Morning
Energy futures are green across the board this morning after yesterday’s selloff had the prompt month RBOB contract break below the $3 level. WTI crude oil futures likewise dropped below $90 per barrel in Monday’s trading session. The September heating oil contract is pulling the complex higher today, trading up 1.2% over yesterday’s settlement while gasoline and crude oil drift marginally higher this morning.
While outwardly bullish on the future of oil prices, Saudi Aramco (the world’s largest energy company) divested much of the profit it made in the first half of the year in alternative forms of energy including wind, solar, and hydrogen. Of course when you make $48 billion in profit in Q2 alone, whose to say a few bucks shouldn’t go to green energy, which seems to be the popular play on Wall Street ever since US lawmakers passed its most recent climate bill.
The National Hurricane Center is now tracking a new system forming off the east coast of Nicaragua, which it gives a 20% chance of cyclonic organization in the next five days. The NOAA’s current projection has the storm hopping over the Yucatan peninsula and into the Gulf of Mexico by next week, where it could threaten energy infrastructure if it makes landfall as anything more than a rainmaker.
New York gasoline prices are trading nearly 50 cents higher than their Gulf Coast counterparts this week. Low regional inventory levels, lack international imports, and previous refinery closures are the cited reasons for the current market condition, which has pushed premiums for shipping gasoline on the Colonial pipeline through the roof over the past 30 days. Shippers looking to send gasoline from Houston to New York paid 19 cents over the interstate pipeline’s tariff to do so last week.
Short sellers’ profit-taking looks to be the reason for this morning’s buying action however traders seem to be taking a relatively bullish stance on diesel prices. The ongoing war in Ukraine and it’s effect on international distillate inventory levels paints a grim picture for this winter, when much of Europe will use the fuel to heat their homes. In combination with the backwardated futures market disincentivizing traders from holding addition inventory, some expect this winter’s diesel stockpiles to reach critically low levels.
Click here to download a PDF of today's TACenergy Market Talk.
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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.