June Begins With Gains In Energy Markets

Energy markets are off to the races to start June trading with gains of around 7 cents for refined products and crude oil contracts up $2.60/barrel in the early going, once again shrugging off the moves in equity markets that are pointing lower to start the week.

OPEC & Friends announced a July output target increase of 411mb/day, the third straight month of accelerated target increases. The fact that prices are rallying despite those promises of increased production suggest some were betting on an even more aggressive output increase agreement as Saudi Arabia tries to give Kazakhstan and U.S. producers a lesson in market share.

Ukraine’s widespread attacks deep inside Russia over the weekend also seemed to convince some that the likelihood of concessions in exchange for peace suddenly look like a long shot.

At least some of today’s spike looks to be driven by short covering after money managers (AKA large speculators AKA hedge funds) added short positions in Brent, Gasoil, RBOB and WTI last week. The total money manager short position for Brent reached a 7 month high just in time for those bettors to get run over by this latest rally, which was also a pattern we saw play out a few times last year.

The DOE axed 2 dozen clean energy projects that had been approved for nearly $4 billion in grants under the previous administration, noting that the majority of those projects were approved between election and inauguration day. While that move may be seen as a benefit to big oil companies, it’s worth noting that a project at Exxon’s Baytown refinery to produce ethylene from hydrogen was also among the projects eliminated.

The EIA Friday highlighted how the growth in Hybrid vehicles has continued in the U.S. this year, while EV sales have declined. Part of the reason for the drop in EV sales appears to be an increase in average costs of $3,700/electric vehicle during Q1 alone, while the average cost of all vehicles dropped by $2,200. It’s likely we could see EV sales continue to slow as tax credits are phased out, but the hybrid train looks like it will continue to roll.

Baker Hughes reported a decline of 4 oil rigs active in the U.S. last week, while the natural gas rig count increased by 1. The oil rig count is now at its lowest total since November 2021.

Numerous refinery upsets were reported over the weekend with at least 3 in TX and 2 in California.

Exxon Baytown had an upset in an FCC unit caused by incomplete combustion in a boiler, that event lasted almost 2 full days last week.

Total Pt Arthur had another weather-related upset as heavy rainfall caused an upset at an unidentified unit.

P66 continues to have struggles getting its Borger TX refinery back up and running at full rates, reporting another upset over the weekend.

Chevron reported 2 different unplanned flaring events at its El Segundo CA (LA-area) refinery, one Friday morning and another one Saturday evening.

PBF reported it was planning 8 days of flaring at its Torrance CA (LA-area) refinery lasting until June 9th for unnamed repairs. That facility has been undergoing several rounds of maintenance over the past 2 months.