US Equity Markets Are Pointing Modestly Higher To Start The Week, After The S&P 500 Settled At A Record High Last Week

It’s a mixed bag for energy futures to start the week. RBOB gasoline prices are up about 2.5 cents in the early going, while ULSD futures are ticking about a penny lower and crude oil prices cling to small gains. 

US equity markets are pointing modestly higher to start the week, after the S&P 500 settled at a record high last week. The correlation between energy and equity markets still isn’t strong, but it’s moved into positive territory recently so the pull higher from stocks could certainly trickle over into futures. 

Libya announced it resumed production at its largest oil field after the latest protest-induced shut in as that country still struggles to find normalcy 12+ years after the Arab Spring. Those restarts seem to be helping cool fears of oil shortages from the ongoing disruptions to Red Sea shipping, but other industries – particularly across Europe – are starting to feel the strain of longer shipping times.

Concerns over European supply vs the US are evident in the weekly Commitments of Traders reports with Brent and Gasoil contracts both seeing new length added by money managers, while the NYMEX trio all saw reductions in length last week. One interesting note in the CFTC report Friday was that WTI saw the producer/merchant trade category reach its largest net-length of the past decade. Often times producers will be short these contracts as a hedge of their future production, but this growing net length suggests that traditional hedging may be lower (perhaps in part due to the recent acquisition activity reducing the need for short term cash flow management) or more likely that US production bound for the export market is bringing in more buyers who are hedging their forward purchase demand.

Canada’s regulators approved a variance request for the Trans Mountain pipeline that will allow that 590mb/day line to begin operations in the next few months. Today’s interesting read from RBN Energy, how this new pipeline will complicate operations for US refiners in the Midwest and Gulf Coast and threaten the extra margin that’s been a key part to many facilities over the past decade.

Sunoco announced it is buying NuStar energy for $7.3 Billion this morning.  More details will be provided in a presentation later this morning, but the closing is tentatively set for the 2nd quarter of this year.

Marathon reported unplanned flaring at its LA-area Wilmington refinery this morning, 2 days after a broken pipe spewed an oil mixture into a neighboring street. LA spot prices have come under heavy selling pressure lately as healthy supplies meet the January demand doldrums, and if these events are more than an unfortunate mishap, they could be enough to at least pause the selling while traders assess any impacts.

Baker Hughes reported a decline of 2 oil rigs operating in the US last week, bringing the total to a new 2 year low, while natural gas rigs increased by 3. 

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