Volatility And Uncertainty Continue Dominant Market Themes After Weekend Of Extraordinary Intervention By Central Banks

Volatility and uncertainty continue to be the dominant market themes after another weekend of extraordinary intervention by central banks to try and limit the fallout of the latest crisis of confidence in the system. 

We’ve already seen big swings in both energy and equity markets in the overnight sessions.  Bulls seem to be arguing that the coordinated actions by central banks and some of the world’s largest financial institutions are proving there will not be a liquidity crisis, while the bears seem to be saying, “If everything is fine, why did two of Europe’s largest banks just get forced into a shotgun wedding?”

Refined product prices dropped 9 cents at their lowest levels, but have since wiped out those losses and turned to modest gains in yet another sign of the choppy action that’s likely in the days ahead. WTI meanwhile set a fresh 15-month low before recovering most of its losses on the day, and charts suggest we could soon see prices in the $50 range if a recovery rally doesn’t come soon.

The CFTC announced Friday it was further delaying its Commitments of Traders reports as it needed to review the data after the cyber-attack that took out a service provider and has kept the position reporting at least 3 weeks behind schedule since early February. ICE continues to publish its weekly COT data on a normal schedule, and showed money managers bailing out of long positions in Brent and Gasoil contracts last week as prices plummeted, and a large amount of new speculative money came in to bet that prices would continue to fall, even though they’re already at 15-month lows. Given the price action we’ve seen in NYMEX contracts the past two weeks, it’s not hard to imagine a similar liquidation of long positions has been going on here as well.

Fed Fund futures traders are laying 37% odds the FOMC will stop their rate hikes this week, while 63% think they’ll continue to increase rates by 25 points according to the CME’s Fed watch tool. Two weeks ago, literally, no money was bet on the FED holding steady. The forward outlook shows that nearly 30% of the money is betting the FOMC will be lowering rates by the June meeting, compared to 0% betting that direction a month ago.

Baker Hughes reported US Oil rigs dropped by 1 last week to a new 9-month low, while natural gas rigs jumped by 9, setting a new 6-month high. That dichotomy was most obvious in the Eagle Ford basin where 6 oil rigs were taken offline, while 4 new gas rigs were added. The Marcellus shale accounted for the remainder of the increase in gas rigs, while the Permian saw a healthy increase of 5 oil rigs negated by the drop elsewhere.

Both Flint Hills and Citgo reported upsets at their Corpus Christi refineries Friday, following the cold front that battered the region with high winds and heavy rain Thursday. The filings made to the TCEQ suggest Citgo may have been forced to take an FCC unit offline, while FHR may have avoided any unit shutdowns during their event. Neither issue is likely to have much influence on Gulf Coast spot markets since Corpus Christi plants don’t touch the Colonial pipeline origin hubs, but they could create product tightness along the San Antonio, Austin, and DFW corridor if they continue.

More French refinery workers are walking off the job this week after pension reforms were passed by parliament last week. The impact of the protests may now turn from a nuisance to a more serious disruption as more facilities are expected to be taken offline.  

A worker at the CVR refinery in Coffeyville Kansas was killed over the weekend, as that facility was undergoing planned maintenance. No reports yet as to the cause of that incident, or the potential long-term impact.

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