Energy Futures On Cusp Of Technical Collapse

WTI dropped below $70 for the first time since December 2021 overnight as markets around the world continue to reel from the fallout of multiple bank failures over the past week. Refined products are now teetering on the edge of a technical breakdown that could knock another 10-15 cents off of prices in short order and given the “risk off” sentiment gripping markets this week, it’s not hard to imagine that type of push lower in the next day or two regardless of any fundamental news.
Look at how the financial world has changed in just 1 week. Last Wednesday, no one thought the FED would hold rates steady at the March FOMC meeting, while 78% odds were given to a 50-point rate hike. Today, there’s a zero percent chance of a 50-point rate hike given and 40% odds that the FED will not raise rates at all.
OPEC’s monthly oil market report kept its forecast for global oil demand steady for the year, as stronger economic growth in China was expected to be enough to offset the slowdown in activity in the US and Europe. The report also highlighted the counter-seasonal weakness in distillates globally in February, as new refinery output in Asia put downward pressure on prices across the rest of the world, while the lack of winter heating demand kept buyers on the sidelines. The cartel’s total output ticked up by 117mb/day in February, with gains from Saudi Arabia, Nigeria and Libya offsetting declines in Angola and Iraq.
The API reported that US Gasoline stocks dropped by 4.6 million barrels last week, while distillates declined by 2.9 million barrels and crude oil stocks increased by 1.1 million barrels. The EIA’s report is due out at its normal time this morning and may be shrugged off if there are fireworks going off in equity markets when it’s released as suddenly the Crude oil Adjustment factor just doesn’t seem so interesting.
French strikes are continuing for an 8th day, with some refinery disruptions ongoing, but with generally much less impact than what we saw last fall when many fueling stations in the country ran dry. It appears that the turnout for the protests has waned in the past several days, which is allowing some fuel shipments to continue. A parliamentary vote is expected Thursday, which could mean more urgent protesting if pension reforms are passed, or celebrations and a return to normal operations if it fails.
LyondellBasell issued a press release Tuesday that included an industry leading number of corporate buzzwords. The announcement obfuscated news that it had not found a buyer for its Houston refinery, and would continue with plans to exit the business, and perhaps retrofit the facility to produce Hydrogen as part of its “Circular & Low Carbon Solutions”.
The Deer Park refinery offered another example of how complicated the refining process can be, and why startups can be the most dangerous time for a facility when another fire broke out Tuesday, as the plant was attempting to restart operations after another fire in February.
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