Energy Futures Moving Tentatively Higher

Energy futures are moving tentatively higher, reaching fresh 5 month highs to start the week as ongoing refinery issues, supply concerns from OPEC members, and optimism over a US-China trade deal continue to outweigh concerns of an economic slowdown. Although the gains so far are minimal, the break above technical resistance leaves the door open for much higher prices in the coming days.

A strike at Europe’s largest refinery is reported to turn one of the largest sellers in the region into a buyer, which seems to be providing some upward pressure on product prices. Oil meanwhile appears to be getting a boost from reports of more fighting in Libya, although so far the country’s exports – which have been in a constant state of flux for most of the past 8 years - are not immediately at risk.

The latest oil-market news from the Venezuelan saga are reports that output dropped below 1 million barrels due to power outages last month, and the US announced new sanctions on specific vessels to try and cut off export flows to Cuba.

Baker Hughes reported an increase of 15 oil rigs working last week in the US, snapping a 6 week stretch of declines and marking the largest increase since last May. Texas led the way with an increase of 8 total rigs put to work last week, snapping a streak of 12 consecutive weeks of lower figures.

Money managers continue to be cautiously bullish on oil prices, increasing their net-long holdings in both Brent and WTI for a 5th straight week, although the total length is still well below year-ago levels. The speculative category of trader remains fairly bullish on gasoline prices, with net length holding above its 5-year seasonal range, although there was a slight decrease in holdings last week. Those large speculators remain bearish diesel however with ULSD contracts holding in net-short territory (betting on lower prices) for a 2nd week, reaching the lowest levels in nearly 2 years.

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