Volatility Without Direction: Energy Markets Tread Water

It’s been another busy overnight session for energy markets, although you’d never know it if you just looked at current values with refined products trading close to breakeven for the day. Sunday night saw a wave of selling that pushed products down 5-7 cents after the U.S. said it would begin guiding stranded ships through the Strait of Hormuz on Monday. Those losses quickly reversed course and turned into double digit gains overnight after reports that the IRGC had hit a U.S. Naval ship with missiles. Those gains then disappeared around 7am central as reports from the U.S. suggested no such attack occurred.

So, here we are, going nowhere for the moment, which seems a fitting price action considering that’s how it appears the conflict in general is proceeding. Enjoy the respite while it lasts.

Look out below: Chicago diesel prices dropped nearly 65 cents/gallon on Friday as basis differentials started their collapse after a record-setting rally following multiple refinery upsets in the region earlier in the week.

Marathon reported unplanned flaring at its 630mb/day Galveston Bay (Texas City) refinery over the weekend. The filing with the TCEQ highlighted 35 hours of flaring starting Saturday morning cased by a leaking Fuel Gas knockout pot control valve.

Money managers continued their recent trend of mixed reactions to the price action, making small increases to net length in Brent, Gasoil and RBOB contracts and small decreases in ULSD and WTI. Perhaps most notable in an otherwise quiet COT report was another 10% drop in open interest for Brent crude after that figure reached an all-time high in March.

Baker Hughes reported an increase of 1 oil rig and 1 natural gas rig active in the U.S. last week. While the headline data for the week was pretty boring, the details have a more interesting story as the rig count on land dropped by 6 to a fresh 4+ year low of 389, while the off-shore rig count increased by 7 on the week to a fresh 6-month high.

The Primary Vision count of fracking crews active in the U.S. increased by 5 on the week to 174 which is also the highest level in almost 6 months.