Low Pressure Storm System Could Disrupt Gulf Refining Due To Potential Flooding

Energy futures are drifting higher this morning as the market mulls just how hawkish the President’s “major announcement” on Russia is going to be later today. While the plan will likely include a more vigorous support for Ukraine, particularly with the supply of offensive weapons, traders will have the ears piqued for any mention of increased or modified oil sanctions, particularly involving Sino-Russo transactions.

WTI crude oil futures are leading the way higher, adding on $1.19 per barrel in pre-market trading. Gasoline and diesel are lagging behind, but only just, with gains of 2.4 cents and 3.3 cents, respectively.

Baker Hughes reported yet another drop in active oil production platforms last week, making it the 11th week of consecutive declines. At 424, the active rigs in the U.S. sits at the lowest level since September 2021, nearly 60 rigs less than one year earlier.

Money managers piled on fresh long speculative positions across the energy board last week, with the exception of American crude oil futures, which saw a decrease in bullish bets and an increase in new short positions. Risk-on was the name of the game last week as all 5 major instruments saw an increase in open interest.

The National Hurricane Center is tracking a system that it expects to hop across Florida from the East over the next couple days. The low pressure area is then given a 30% chance for cyclonic development over the next week, but refiners along the coast know heavy rainfall and flooding can just as, if not more so, dangerous to production as gale-force winds.

Today’s industry curiosity: The Department of Energy announced on Friday that it will give ExxonMobil up to 1 million barrels of crude oil from the nation’s Strategic Petroleum Reserve to help ease “logistical challenges” of getting oil to its Baton Rouge refinery. In return, XOM will repay the borrowed barrels, plus some extra, at a later date that was not listed. There was no indication if the amount of the excess repayment barrels will fully offset the savings created by the backwardation in WTI crude oil futures.