Despite Equity Futures Pointing Sharply Higher Energy Futures Hover At Break Even Levels

Energy futures are hovering near break-even levels Tuesday as traders return to the office after a quiet holiday shortened trading session Monday. So far energy contracts seem to be ignoring a strong morning for U.S. equity futures which are pointing sharply higher to start the day.

Trade uncertainty and potential sanctions continue to make headlines while OPEC & Friends are set to meet again this weekend with rumors swirling that Saudi Arabia is pushing for another increase in output in July. It’s also worth noting that the Saudi’s are taking advantage of their new refining capacity to push record exports of refined products – which aren’t restricted by OPEC quotas.

Money managers were adding modestly to their net length in most energy contracts last week with ULSD, RBOB, Brent and Gasoil all seeing increases due to a mix of new long positions and some short covering in the diesel contracts. WTI continues to buck the trend, with a net decrease of more than 10,000 contracts last week as speculators liquidated long positions and added new shorts.

In environmental program credits, money managers continued their recent trend of reducing their length in state-level programs with CA LCFS and CCA positions and Washington CCAs all seeing a small reduction in large speculative bets on higher credit values. RINs continued to be a mixed bag with D4 (Bio/RD) positions seeing another healthy outflow of speculative length while D6 (ethanol) positions ticked modestly higher for another week. California’s LCFS values dropped to a 9 month low last week at $50/MT as uncertainty over the state’s program lingers while CARB’s revisions to the program are under review, and the delayed start of the more stringent rules means that many companies (including one that sells subscriptions to track these values) overestimated the deficit per gallon for the first half of the year.

Baker Hughes reported a large drop in drilling activity last week with the active count of U.S. oil rigs declining by 8 on the week while natural gas rigs dropped by 2. The losses were spread out across the country with the Eagle Ford Basin down 4 rigs on the week while the Permian saw a drop of 3 and the Williston basis declined by 2. The Permian and total U.S. oil rig count both reached their lowest levels since November 2021.

Chevron reported another unplanned flaring event at its El Segundo CA (LA-area) refinery Sunday, with the cause listed as unknown and under investigation. That facility has had numerous upsets in recent weeks.

P66 reported an upset affecting multiple units at its Borger TX refinery over the weekend, with an investigation ongoing.