Biggest One Day Sell Off Sparked

Energy and equity markets both proved they had out-kicked their coverage with their recovery rallies this week, as euphoria over reopening turned into fear about the future, and sparked the biggest one day sell off in six weeks. Both asset classes are seeing a healthy bounce this morning as cooler heads seem to be prevailing as they realize that not much has actually changed in the past 48 hours.

WTI dropped eight percent on Thursday, wiping out June’s gains in a single session. That sounds like a big deal, and in most years it would be, but less than two months after prices dropped 350 percent in a day, it just doesn’t feel that scary any more. While Thursday’s big drop did break the upward trend on the daily charts, the weekly and monthly charts are still hanging on to theirs, so it’s still too soon to say that the longer term recovery rally in energy prices is over.

Recovery or head-fake? Group 3 ULSD basis values are up a dime in June as demand recovers and inventories in the region draw down from all-time highs. USGC basis values are also strengthening across the forward curve as bottom pickers and storage players both seem to be bidding to not miss some of the best values they’ve seen in a decade, while others seem to be betting that refiners will be forced to cut diesel runs to deal with excess inventory and weak margins.

Today’s interesting read: Why a lack of sports may be driving small time gamblers into the stock market and impacting things like the Hertz bankruptcy. Maybe they should ask some of the retail investors long WTI in April how that worked out for them.

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