Have The Bulls Regained Control?
Have the bulls regained control? Most energy contracts are poised to end the week with solid gains despite some choppy, back and forth action. The bounce after testing trend support leaves the door open to a challenge of the year’s highs as we roll into June.
It’s the last trading day in May, so watch the July (RBN and HON) contracts for price direction today. It’s also the Friday before a holiday weekend so expect liquidity to dry up early as traders hit the road. Rack prices published tonight are expected to carry through until Tuesday, futures will trade in an abbreviated session Monday, so suppliers will reserve the right to make changes in case of price swings.
What a difference a year makes. Last year, retail gasoline prices were below $2/gallon heading into Memorial Day weekend as most Americans were forced to stay home. This year, the EIA reports that prices are at their highest levels since 2014, which was when oil was still going for more than $100/barrel. The report highlights growing gasoline demand, reduced refinery output, and the Colonial disruption as factors in that retail price increase, but fails to note the 22 cent/gallon cost of complying with the renewable fuel standard.
A tale of two products in on city: LA spot basis for CARBOB spec gasoline reached its highest level of this year Thursday, while CARB diesel basis reached its lowest levels in more than a year. You can look at the state’s inventory levels and make an argument for this divergence in values, as gasoline stocks in the state have reached a 12 month low, while diesel inventories are at the top of the range. A closer look at the weekly charts provided by the state’s version of the EIA however shows that the tight gasoline supplies are focused in the northern half of the state. A gasoline making unit in the LA market was forced to shut earlier this week, turning that refiner into a buyer, which seems to be the driving force behind this rally.
It’s been a huge week for climate change voting at oil producing companies. Chevron was the latest oil major to have investors vote against management in climate-related policy this week, not long after the Oracle of Omaha reportedly cut his stake in the company by half, which may well have changed the outcome of that vote. Total meanwhile went a different route, and offered shareholders a plan to rebrand as Total Energies and shift focus towards more renewables, which was approved by more than 90% of votes.
After facing selling pressure earlier in the week, RIN values were back on the move higher Thursday following a big bounce in corn prices.
Click here to download a PDF of today's TACenergy Market Talk.
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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
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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.