Energy Prices Wilt In Early Morning Trading, Mimicking Eagles' Second Half Performance

Refined products are seeing modest losses this morning, after nickel gains on Friday and following a choppy overnight session that swung between losses and gains. The lack of staying power to the rally sparked Friday following Russia’s threat to cut oil output in retaliation for price cap and embargo restrictions shows that Putin’s energy weapon is diminishing as the world has had more time to adjust to its new supply realities. 

Russia’s fuel exports were estimated to drop by 10% in the first week since the EU embargo took hold, although stormy weather and tanker delays may be playing more of a role in those early numbers than a lack of buyers under the new price cap system.

The CFTC didn’t publish the commitments of traders report for a 2nd week due to the fallout from a ransomware attack at one of its reporting entities. Because of that, we won’t know how the big money hedge funds reacted to the plunge in prices to start February, or the bounce last week for a while longer.

Baker Hughes reported an increase of 10 oil rigs, and a decrease of 8 natural gas rigs drilling in the US last week. The decline in natural gas rigs is the largest drop in 5 years, and comes as US Shale producers face the challenges of operating in a world in desperate need of their product, but there still are not enough outlets to freeze and ship it overseas. The much warmer than normal winter is also playing a part, with reports suggesting that cuts are needed in some areas to prevent storage reaching capacity. New Mexico and Louisiana led the increase in oil rigs, while Texas accounted for a drop of 7 rigs total.

The Dallas FED released a study last week showing that business activity in Texas continues to expand, albeit at a very slow pace over the past 6 months. The report also showed “tentative” signs that the labor market was finally cooling, although the Lone Star state continues to outpace the rest of the country in jobs growth.

Flint Hills reported a leak from an unknown source in its storm water sewer system at its refinery in Corpus Christi on Sunday.  So far, that leak doesn’t seem to have impacted operations, although the cause it still unknown. Exxon also reported a minor upset that caused flaring over the weekend at its Baytown plant, which is undergoing a major turnaround event and is therefore unlikely to have any impact on markets. 

Suncor announced Friday that it was beginning restart on 1 of its 3 production units at its Commerce City refining complex, which should help alleviate the supply shortages in Colorado as soon as this week, as long as those restart efforts – which are often the most dangerous part of a refineries operations - go well.

No word yet if any of the 3 remaining Philadelphia area refineries had issues overnight after their team flamed out in the 2nd half.

In case you missed it last week (like I did) here’s a quick read from the WSJ on the history of the Jones Act and how it affects today’s home heating prices. 

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