Energy Futures Are Trading Lower To Start Monday’s Holiday-Shortened Trading Session

Market TalkMon, Jan 15, 2024
Energy Futures Are Trading Lower To Start Monday’s Holiday-Shortened Trading Session

Energy futures are trading lower to start Monday’s holiday-shortened trading session, adding to the bearish action we saw Friday when huge morning gains turned into afternoon losses. Reminder that futures are trading in an abbreviated session today, but there will not be a settlement today and spot markets are not being assessed. 

ULSD prices continue to be the most volatile in the complex, plunging 17 cents since topping out Friday morning. That sharp pullback leaves diesel futures in the middle of their winter trading range, and set for more choppy back and forth action.

RBOB gasoline futures have dropped more than a dime from Friday’s high, and are also looking neutral on the charts with a break above $2.20 or below $2 needed to provide some direction.

The US struck another Houthi target in Yemen Friday, and a fighter jet downed a missile aimed at one of the Naval destroyers in the region, but those events don’t seem to be enough to get buyers interested. 

As suspected, the refineries around the Texas Panhandle were all impacted by the severe weather with Valero Mckee, P66 Borger and Delek Big Spring all reporting operational upsets to the TCEQ over the weekend.  

In addition, Valero and Flint Hills both reported upsets at their Corpus Christi refineries but it’s not clear if those events were weather related and so far it appears that the rest of the Gulf Coast refiners haven’t been impacted. The real test for refinery row will come overnight tonight as lows in the Houston area are expected to drop to around 23 degrees which will stress equipment and the grid. The cold isn’t expected to last long however, so widespread supply disruptions still seem unlikely at this point.

Besides the refinery hiccups which appear relatively minor so far, there were numerous notices of terminal outages or restrictions due to the sub-zero temperatures stretching across so much of the country, but with many drivers staying off the roads due to the weather and the holiday, these events don’t seem too disruptive so far. The net impacts will take another day or two to assess, and with most traders taking today off since spot markets aren’t being assessed, we’ll have to wait until tomorrow to see the reaction in cash markets.

The Chevron Richmond refinery near San Francisco reported a 3rd upset in as many weeks Saturday. So far each of the events have had minimal impact on operations or regional prices, and the company said it expected no offsite impacts.

Short covering was the theme of the week in the CFTC’s Commitment of Traders report.  Money managers liquidated more than 29,000 crude oil contracts that had been betting on lower prices and added more than 29,000 new long positions in Brent, which largely offset the bets made the prior week. The big swings in large speculative money moving in and out of the energy space appear to be contributing to the knee-jerk price reactions over the events in the Red Sea and may help explain why the price rallies have been so fickle lately.

Baker Hughes reported a decline of 2 oil rigs and 1 natural gas rigs in the US last week, with the Permian basin accounting for the entire drop.  


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Energy Futures Are Trading Lower To Start Monday’s Holiday-Shortened Trading Session