Abbreviated Trading Session Starts Mixed

Energy futures are starting Presidents’ Day abbreviated trading session mixed this morning. The prompt month gasoline contract is up about a penny per gallon, while its distillate counterpart is down about the same. American and European crude oil benchmarks are pretty much flat so far, sitting on opposite sides of unchanged.

The two-week fire sale of WTI longs by the money manager category of commodities traders slowed last week with the liquidation of just over 9,000 contracts. It looks like the fun is only getting started for Brent crude however, as this week’s drop in speculative longs breaks through the five-year seasonal average. It will be interesting to see if the liquidation slows as it reaches the low end of the seasonal range, like WTI did this week, or if the risk-off mentality will draw new lows on the chart.

Baker Hughes reported the addition of two working oil rigs last week. Despite the sizable drop in WTI prices, last week’s number brings the total net change in rig count to +8 since the beginning of the year. While demand concerns related to the Wuhan virus still seem to loom over producers, there seems to be a light at the end of the tunnel as some start to ask ‘what happens next?’

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