Energy Futures Pick Up Where January Left Off

Energy futures sold off overnight to pick up February where January left off, but have since recovered most of those losses on the heels of a rally in U.S. equities.

The Coronavirus continues to dominate all non-football news. While there are still few answers to how far this new virus may spread, several reports detailing how the outbreak is likely to impact far fewer people than the flu sheds light on how fear of the unknown can be such a powerful force in the markets.

January was the first month since the meltdown of 2008 that diesel futures had both a 50 cent trading range, and a 40 cent drop for the month. Diesel futures are at their lowest levels since August of 2017, and are begging for a short term bounce as several technical indicators are at their lowest levels in more than 2 years.

Chinese traders are considering declaring force majeure rather than accept delivery of fuel they don’t need which would likely force numerous LNG and Oil cargoes to find a new home, or

OPEC & friends are considering moving up their scheduled March meeting to mid-February, and may increase output cuts to limit the damage to prices being done by the temporary drop in demand.

As expected during the heavy sell off of the past two weeks, money managers slashed their net long holdings in energy contracts, and it seems like we could see that liquidation of speculative bets on higher prices continue in this week’s report.

A new note from the EIA this morning highlights how U.S. oil and natural gas production is benefiting from continued advances in technology to reach record high output even with fewer active wells.

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