Petroleum Complex Fell Out Of Bed Wednesday Morning With Refined Products And Crude Oil Down
It looks like petroleum complex fell out of bed Wednesday morning, with refined products down a 6-7 cents and crude oil down more than $2, but in reality this selling started just after Tuesday’s (strong) settlement and continued throughout the overnight session. The move lower has wiped out the gains of the previous two sessions, the leaves the energy complex on a precarious technical footing, and threatening a much bigger move lower after a strong rally for most of the past 18 months.
Yesterday’s API report is getting credit this morning for the drop in prices as the most heavy selling occurred shortly after that report was released. US Crude oil inventories built by nearly 3.6 million barrels last week, but refined products only saw small moves, and Cushing OK inventories dropped yet again. The DOE’s weekly report is due out this morning.
A fire broke out at the Shell refinery in Convent LA, as the company was attempting to start its main crude unit, delaying the lengthy repair process since the plant shut during Hurricane Ida more than 2 months ago. That news seemed to help RBOB futures find their footing after a weak start Tuesday, although clearly that strength is proving to be short lived. It’s worth noting that the $2.39 range for RBOB is where we’re seeing December futures trade currently, and
Refinery disruptions around the US, Canada and Europe are all contributing to some of the steepest backwardation in gasoline prices we’ve seen in a decade. NYH RBOB is worth nearly 14 cents more today than it is at the end of December, which helps explain why premiums for space on Colonial are barely positive even though there’s a 9 cent spread between the Gulf and the Harbor on a prompt basis.
Don’t be surprised if the next 24 hours is full of more price swings. We’ll get the FED’s announcement on tapering their money printing program later this afternoon, which has the potential to create big waves in financial markets including the energy arena, although many times we see a bit of a delayed reaction as the people still involved in trading need time to digest the statement.
OPEC and Friends meet tomorrow morning and usually we’ll see prices swing ahead of any official announcement – if there is one at all – as floating rumors to reporters seems to be a favorite past time at these events.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllGasoline Futures Are Leading The Energy Complex Higher This Morning With 1.5% Gains So Far In Pre-Market Trading
Gasoline futures are leading the energy complex higher this morning with 1.5% gains so far in pre-market trading. Heating oil futures are following close behind, exchanging hands 4.5 cents higher than Friday’s settlement (↑1.3%) while American and European crude oil futures trade modestly higher in sympathy.
The world’s largest oil cartel is scheduled to meet this Wednesday but is unlikely they will alter their supply cuts regimen. The months-long rally in oil prices, however, has some thinking Saudi Arabia might being to ease their incremental, voluntary supply cuts.
Tropical storm Rina has dissolved over the weekend, leaving the relatively tenured Philippe the sole point of focus in the Atlantic storm basin. While he is expected to strengthen into a hurricane by the end of this week, most projections keep Philippe out to sea, with a non-zero percent chance he makes landfall in Nova Scotia or Maine.
Unsurprisingly the CFTC reported a 6.8% increase in money manager net positions in WTI futures last week as speculative bettors piled on their bullish bets. While $100 oil is being shoutedfromeveryrooftop, we’ve yet to see that conviction on the charts: open interest on WTI futures is far below that of the last ~7 years.
Click here to download a PDF of today's TACenergy Market Talk.
The Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.
The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.
We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.
The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.
There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.
As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.
Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.