Small Contract Losses and Gains Start Thanksgiving Week 2019
It’s a mixed start to the week for energy contracts, with WTI and RBOB showing small losses, while Brent and ULSD cling to small gains. Prices remain within striking distance of the high-end of the November trading range, but so far seem unwilling to make the next move with uncertainty over trade talks and the upcoming OPEC meeting both looming.
Money managers made very small additions to their net long holdings of Brent, ULSD and RBOB contracts as of last Tuesday (when the COT data is compiled) and made a slight reduction in their long bets on WTI.
Baker Hughes reported a 5th straight weekly decline in the US oil rig count, to a total of 671 active rigs. Drilling activity according to this measure is approaching a 3 year low, with 206 rigs taken out of service so far in 2019.
Here’s a decent (if biased) read on the state of the renewable fuel standard, that also helps to partially explain why biodiesel RINs are holding near multi-year highs while ethanol RINs are holding near multi-year lows (chart below).
Thanksgiving Holiday Trading Schedule: The CME’s NYMEX contracts will trade in abbreviated sessions both Thursday and Friday this week, with settlements published only for Friday. The major spot market publications will be closed both days so expect the NYMEX volumes to be low most rack prices to carry through the long weekend, although most suppliers will reserve the right to change prices should something exciting happen.
Click here to download a PDF of today's TACenergy Market Talk.
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Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.
After Another Black Friday Selloff Pushed Energy Futures Sharply Lower In Last Week’s Holiday-Shortened Trading
After another Black Friday selloff pushed energy futures sharply lower in last week’s Holiday-shortened trading, we’re seeing a modest bounce this morning. Since spot markets weren’t assessed Thursday or Friday, the net change for prices since Wednesday’s settlement is still down more than 6-cents for gasoline and almost 5-cents for diesel at the moment.
OPEC members are rumored to be nearing a compromise agreement that would allow African producers a higher output quota. Disagreement over that plan was blamed on the cartel delaying its meeting by 4-days last week which contributed to the heavy selling. The bigger problem may come from Russia, who announced plans last week to increase its oil output once its voluntary cut agreement ends now that price cap mechanisms are proving to be ineffective.
While an uneasy truce in Gaza held over the weekend, tensions on the Red Sea continued to escalate with the US Navy intervening to stop another hijacking and being rewarded for its efforts by having missiles fired at one of its ships.
RIN values came under heavy selling pressure Wednesday afternoon following a court overturning the EPA’s ruling to deny small refinery hardship waivers to the RFS. Those exemptions were a big reason we saw RINs drop sharply under the previous administration, and RINs were already on due to the rapid influx of RD supply this year.
More bad news for the food to fuel lobby: the White House is reportedly stalling plans to allow E15 blending year-round after conflicting studies about ethanol’s ability to actually lower carbon emissions, and fuel prices. Spot prices for ethanol in Chicago reached a 2.5 year low just ahead of the holiday.
Baker Hughes reported the US oil rig count held steady at 500 active rigs last week, while natural gas rigs increased by 3.
The first of perhaps several refining casualties caused by the rapid increase in new capacity over the past two years was reported last week. Scotland’s only refinery, which has a capacity of 150mb/day is preparing to shutter in 2025.
The CFTC’s commitment of traders report was delayed due to the holiday and will be released this afternoon.
Click here to download a PDF of today's TACenergy Market Talk.