Oil Opens Soft Despite Escalating Supply Threats

Energy markets are starting Monday’s trade on a soft but quiet note, after a big reversal higher on Friday pushed the petroleum futures complex to a strong finish last week.

The UKMTO reported at least 4 more ships were attacked around the Middle East over the weekend, 2 near Saudi Arabia, 1 near Yemen and 1 off the UAE coast. An RPG attack from a small boat was included in the mix which seems like a remnant from the last Middle East wars, compared to the drone-dominated conflicts of today.

They said please don’t hit refineries, they didn’t say depots were off-limits… Ukraine launched more than 1,000 drones at St. Petersburg Saturday night in what may be the largest single night attack of the war. The strikes hit multiple logistical assets including an oil terminal, an oil depot along with a distribution center and data center.

Vladimir Putin is apparently trying to flex his recently improving friendship with the U.S. President, floating the idea of a “peace summit” between Russia, U.S. and China, with the Ukraine war (who isn’t invited) as the topic, rather than trying to find out how to prevent a Russia/NATO or China/Taiwan conflict.

Another Nor’easter is on the way. The National Hurricane Center is giving 40% odds of this storm being named as it moves north along the East Coast this week. The forecasts say this storm will stay offshore, but high wind and waves could cause more vessel delays in and around the NY Harbor, adding more frustration at waterborne terminals across the NE that have only just recently recovered from supply delays after the September Nor’easter.

Phillips 66 reported an upset in a coker unit at its 265mb/day Sweeny TX refinery Friday night, but it appears they were able to quickly resume normal operating rates.

Money managers were adding to their net length (bets on higher prices) in most petroleum contracts last week, with Brent leading the moves once again. The lone exception to speculative bets on higher prices increasing was WTI which saw a small decrease, with covering long positions outweighing short covering for the week, pushing the net length down by less 2,000 contracts (less than 2%). In comparison, the net length in Brent increased by nearly 32,000 contracts due to a combination of new length added and more shorts covered while refined products all saw very small moves made by the big money bettors.

Baker Hughes reported a decrease of 3 active oil rigs in the U.S. last week, while the natural gas rig count increased by 1. The drop in the oil rig count snaps a 6 week streak of increases that had pushed the total count to a 17 month high. The Primary Vision count of fracking crews also dropped last week by 4 crews, snapping its own 5 week streak of increases. See charts below.