The Energy Complex Is Trading Lower This Morning With WTI Futures Leading The Way Lower
The energy complex is trading lower this morning with WTI futures leading the way lower, shaving nearly $5 off the prompt month contract. Chinese low growth demand estimates are taking credit for this morning’s selloff which is pushing American crude oil prices down to the lowest levels seen since February this year. Refined product futures are following suit this morning with both gasoline and diesel prices dropping 10-13 cents.
Money managers trimmed their long positions and bolstered their short positions of WTI crude oil futures last week. The “smart” money earned their title’s quotations marks as the oil benchmark jumped nearly $4 from 8/8 to 8/12. Speculators did the same with their positions in RBOB, European crude oil, and gasoil last week but ULSD continued to stand out from its counterparts. Market bettors continued to trim their shorts resulting in an increase of their net position for the 6th week in a row.
The National Hurricane Center is tracking a storm just north of the Lesser Antilles but give the system a 0% chance of organizing within the next couple days. While it may seem like 2022’s Atlantic hurricane season is a snoozefest, its important to remember that on average the largest hurricanes typically come in the months of September and October.
RBOB futures are testing some technical support on their weekly charts this morning, possibly turning the low $2.90s into a key level in deciding whether prices can continue falling. Should gasoline prices fall and stay below that level, there is little on the charts to keep them from continuing lower to the $2.70s. Diesel futures on the other hand face a myriad of technical resistance levels between where we are trading currently, the $3.40s, and the $3.20s. If we see a meltdown in energy prices over the next couple weeks, expect distillate prices to drop much slower than the rest of the complex.
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.