Crude Cracks 6-Month High As Storms Stall Terminals And Trade Tensions Roil Markets

It’s a mixed bag for energy markets after crude oil prices reached a 6-month high on Friday as a major storm system batters the East Coast, and uncertainty over global trade roils markets.

ULSD Futures are pushing up by more than a nickel for the March contract that’s set to expire at the end of the week, while forward months are seeing smaller gains. RBOB gasoline futures are seeing a reverse pattern with March futures trading lower while forward months see modest gains. Both of those moves seem to be consistent with a major winter storm that shuts down travel for a period of time, but also threatens to increase diesel demand for power and heating needs.

So far the EIA’s hourly electric grid monitoring system shows no petroleum being used to generate electricity, whereas the earlier storms saw diesel generation surpass natural gas production for several days. The forecast also suggests that the cold air will not be anything like the record-setting cold snap we saw earlier in the winter so heating oil demand should not see an extended spike.

Boom town to ghost town: Terminals all along the North East coast were slammed over the weekend as stations tried to keep up with pre-storm demand, with hours-long waits becoming common at many facilities. Those terminals are empty this morning as heavy snow and 30-50 mile per hour winds shut down travel across a large part of the region. Vessel delays are a certainty this week given the high winds and heavy precipitation, but given that many drivers will stay off the roads for a couple of days, the impact of those delays may be limited.

After the U.S. Supreme Court deemed many tariffs implemented by the U.S. last year as illegal, the White House announced new temporary import duties Friday, but those exclude “…energy and energy products” along with several other commodities and anything already covered under the USMCA.

Money managers were making modest reductions in their net length (bets on higher prices) in the big 5 petroleum contracts last week with a combination of long liquidation and new short positions added. Given that this data was collected on Tuesday, this means that those new short positions were run over by the big rally Wednesday and Thursday. Large speculators were adding to length in D6 RIN contracts last week, jumping on the bandwagon as prices rallied to 2.5 year highs, but we also saw some speculative short positions added in D4 RINs which has been uncommon in the past couple of years.

Baker Hughes reported steady oil and natural gas rig counts for the week with no net change, while Alaska added 2 rigs and Texas added 1, while Louisiana saw a decrease of 2 rigs and New Mexico dropped by 1. The U.S. oil rig count is holding near a 5.5 year low at 409 active rigs, while the natural gas count is holding at a 2.5 year high of 133 active rigs.

The Primary Vision count of fracking crews increased by 7 last week as the count recovered from shutdowns during the winter storms.