Energy Futures Try To Find A Bid

Energy futures are trying to find a bid this morning, in spite of headwinds from weaker equity markets, and a dire outlook for fuel demand. It’s the last trading day for April RBOB and ULSD (HO) futures, so watch the May contracts for price direction at the racks, while we could see some fireworks in the expiring contracts as we wind down one of the most volatile months on record.

With the U.S. more or less planning to stay on lockdown for all of April, and EPA restrictions being delayed or waived, it’s difficult to see a strong fundamental argument for prices to sustain any sort of meaningful rally in the next few weeks. The WSJ noted yesterday that cheap gasoline abounds at retail stations across the country, unfortunately - and largely because - no one is around to buy it.

Monday’s action could be seen as pivotal for gasoline prices trying to carve out a floor as early eight cent losses turned into a penny gain by the end of the day. Then again, that nine cent swing was less than half of the range that we saw in the previous three Monday trading sessions, so it could just be lost in the noise of volatility if prices don’t continue that rally this week.

WTI also dodged another technical bullet Monday, managing to hold above $20 by day’s end, despite trading below that level several times throughout the day. Here too, we’ll need to see prices rally above their downward sloping trend line this week to avoid another wave of technical selling.

The Dallas FED’s Texas manufacturing survey for March illustrates just how quickly the COVID-effect hit producers in the state.

The crack-spread charts below show the dire economic outlook for refiners over the next 6 - 12 months based on current forward curves, and help explain why it’s now more news worthy if a refinery isn’t cutting rates, as plants around the world are curbing production at unprecedented rates.

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