Wild Week Of Market Whiplash

Market TalkFriday, Jan 8 2021
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Remember a week ago when everyone was excited for a fresh start in 2021? It’s been a wild first week of the year with markets whiplashing in reaction to large amount of major news stories that ranged from surprising to surreal. In the end, both equity and energy markets look like they’ll end the week with strong gains, and keep the charts pointing higher in the near term as new multi-month highs are being set this morning.

Saudi’s go-it-alone battle to prop up global oil prices is ultimately the big story that seems to have helped energy prices maintain their upward momentum after a huge reversal lower Monday had them on the brink of collapse. While the short term surprise is seen as a gift by many, the other producers need to remember there’s no such thing as a free lunch.

The Senate was flipped, giving Democrats control of the executive and legislative branches for at least two years. That same day, we saw democracy face a most unusual attack, and ultimately prevail. This morning, markets seem to be celebrating a return to (relative) normalcy after the current U.S. President finally conceded defeat and cleared the pathway for the transition of power in less than two weeks.

For perspective on how busy it’s been: In most weeks, Iranian sabre rattling such as threatening the U.S. Capitolseizing a Korean oil tanker, and (probably) planting a mine on an Iraqi tanker would have been front page news, and this week it was hardly even mentioned. 

The December payroll report released this morning showed a decline of 140,000 jobs in the U.S., as COVID shutdown measures snapped a growth streak for employment dating back to last April. Both the headline and U6 unemployment rates held steady for the month at 6.7% and 11.9% respectively. The bright side of the report was that the estimates for October and November were both increased, by a total of 135,000, nearly offsetting the monthly total. Refined product futures pulled back by almost a penny from their morning highs after the report, as it is another fundamental data-point that there are some major headwinds pushing against fuel consumption this winter.

Today’s interesting read from the WSJ: Why consumer behavior suggests that oil consumption will continue to grow far longer than recent headlines might have you believe. (In other words, everyone likes talking about green energy, but nobody likes paying for it).

Click here to download a PDF of today's TACenergy Market Talk.

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Pivotal Week For Price Action
Market TalkMonday, Oct 2 2023

Gasoline 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.

Pivotal Week For Price Action
Market TalkFriday, Sep 29 2023

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.

Pivotal Week For Price Action
Market TalkThursday, Sep 28 2023

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.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.