Energy Futures Are Ticking Modestly Higher In Quiet Trading Friday Morning
Energy futures are ticking modestly higher in quiet trading Friday morning with politics and basketball taking over the headlines.
The financial times is reporting that US officials put pressure on Ukraine to stop attacking Russian refineries because they “Risk driving up global oil prices” and “nothing terrifies a sitting American president more than a surge in pump prices during an election year.” If true, that puts an interesting political spin on the situation as it gives Ukraine leverage to negotiate for the artillery they’ve been begging for to fight the war in their own country, and house republicans may be more apt to continue blocking that funding even though a majority in the Senate are ready to approve it. No word yet on if US officials have also asked nicely for Russia to stop attacking Ukrainian power plants.
Another big story in energy politics this week has been the announcements from the EPA on changing CAFÉ standards and EV emissions calculations. The delays in the standards appear to be a concession to the auto industry who has said that the previous targets were unattainable and would take away union jobs.
Sticking with the political theme this morning, the ranking member of the Senate’s Committee on Energy called out the IEA Thursday for abandoning the agency’s mission of promoting energy security and instead becoming a cheerleader for an energy transition. While the IEA is an “independent” group built to counter OPEC’s influence after the embargos 50 years ago, the US does provide a large amount of the funding that allows the agency to operate.
The EIA published an analysis on the South China Sea Thursday, highlighting the various disputes and conflicts that keep the region on edge. More than a third of all petroleum shipped by sea moves through the South China Sea, with a staggering 28 million barrels moving every day.
Pemex reported a leak at its 312mb/day Deer Park refinery that spilled oil into the Houston Ship channel Thursday, but the spill appears to be caused by a sump pump, and not a refining operating unit, so the news has been largely shrugged off.
Bracket busted? Don’t worry, you’re not alone.
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News & Views
View AllWeek 18 - US DOE Inventory Recap
Crude Oil, Gasoline, And Diesel Benchmarks Are All Trading >1% Lower To Start The Day
Energy prices are sinking again this morning, albeit with a little more conviction than yesterday’s lackadaisical wilting. Crude oil, gasoline, and diesel benchmarks are all trading >1% lower to start the day with headlines pointing to an across-the-board build in national inventories as the source for this morning’s bearish sentiment. The Department of Energy’s official report is due out at its regular time this morning (9:30am CDT).
WTI has broken below its 100-day moving average this morning as it fleshed out the downward trend that began early last month. While crossing this technical threshold may not be significant in and of itself (it happened multiple times back in February), the fact that it coincides with the weekly and monthly charts also breaking below a handful of their respective moving averages paints a pretty bearish picture in the short term. The door is open for prices to drop down to $75 per barrel in the next couple weeks.
Shortly after the EIA’s weekly data showed U.S. commercial crude inventories surpassing 2023 levels for the first time this year, their monthly short-term energy outlook is forecasting a fall back to the bottom end of the 5-year range by August due to increasing refinery runs over the period. However, afterward the administration expects a rise in inventories into 2025, citing continued production increases and loosening global markets hindering the incentive to send those excess barrels overseas. The agency also cut back their average gas and diesel price forecasts for the first time since February with the biggest reductions in the second and third quarter of this year.
The STEO also featured their famed price prediction for WTI, stating with 95% confidence that the price for crude oil will be between $40 and $140 through 2026.
Need a general indication of the global crude oil supply? Most headlines seem to be covering a shortage of a different type of oil, one that we haven’t turned into fuel (yet).
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The Perceived Cooling Of Regional Tensions In The Middle East Area Attributing To The Quiet Start To Today’s Trading Session
The energy complex is drifting lower this morning with RBOB futures outpacing its counterparts, trading -.9% lower so far to start the day. The oils (WTI, Brent, heating) are down only .2%-.3% so far this morning.
The perceived cooling of regional tensions in the Middle East area attributing to the quiet start to today’s trading session, despite Israel’s seizure of an important border crossing. A ceasefire/hostage-release agreement was proposed Monday, and accepted by Hamas, but rejected by Israel as they seemingly pushed ahead with their Rafah offensive.
U.S. oil and natural gas production both hit record highs in 2023 and continue to rise in 2024, with oil output currently standing at 13.12 million barrels per day and January 2024 natural gas production slightly exceeding the previous year. With WTI currently changing hands at higher than year-ago levels, this increased production trend is expected to continue despite a decrease in rigs drilling for these resources.
Less than a week after the Senate Budget Committee’s hearing centered on the credibility of big oil’s climate preservation efforts, a major oil company was reported to have sold millions of carbon capture credits, without capturing any carbon. Fraud surrounding government subsidies to push climate-conscious fuel initiatives is nothing new, on a small scale, but it will be interesting to see how much (if any) of the book is thrown at a major refiner.
Today’s interesting read: sourcing hydrogen for refining.
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