Energy Futures Trading Lower

Energy futures are trading lower this morning despite a renewed, hardline stance on Iran’s nuclear program announced yesterday. American and European crude oil contracts are leading the way lower, trading down ~1.5% in pre-market trading. Gasoline and diesel futures are drifting lower in sympathy, both shedding around 1.5 cents to start the day.

The news being blamed for this morning’s bearish sentiment is OPEC+’s announcement that they will continue production hikes next month, expecting to add 411,000 barrels per day to the global oil supply. The cartel made it’s intentions clear over the weekend that it will be shifting gears from supporting oil prices via voluntary production cuts, to grabbing up market share regardless of the lukewarm global demand outlook.

Prompt month WTI futures traded down to $55.30 per barrel overnight, levels not seen since February 2021, barring one day last month when the White House did a 180 on its global tariff policy. If prices continue to slide and manage to break through the $55 level, that could catch some money managers off guard, especially those who added to their long positions last month. In fact, there was almost an across-the-board increase in net length among the petroleum futures last week, save for the of Brent crude oil, which saw traders ease off their bullish bets.

Money managers continued to tack on long positions in D4 RINs last week, a trend that has, on the charts, appeared to be a straight line up since mid-February. The change in speculative D6 positions was muted while the ‘smart money’ unwound some of their short positions in California’s CCA credits.

Baker Hughes reported a decrease of 4 active oil production platforms last week, two of which were in the Permian Basin. We could see the number of shuttered rigs grow this year, if oil prices continue their slide: prices are already too low to justify opening new platforms, according to the Dallas Fed survey published back in March.