Energy Prices Selling Off Heavily To Start The Week

Market TalkMonday, Oct 8 2018
Energy Prices Selling Off Heavily To Start The Week

Energy prices are selling off heavily to start the week following reports that more Iranian oil may remain in the market after US sanctions take full effect next month. Two Indian companies placed orders for Iranian crude in November, and reports suggest the White House is at least considering some waivers on the sanctions in an effort to combat rising prices.

With a third day of selling after 3 weeks of gains, it’s time to look for technical support that could be the difference in a short term correction or a longer term change in trend. Peg the $72 area for WTI, $81 for Brent, $2.30 for ULSD and $2.00 for RBOB as good near term support layers that will be a good test of the bears’ mettle this week.

That system of showers in the Caribbean that was given a low probability of formation last week is about to become Hurricane Michael, and is heading for the US Gulf Coast later in the week. The good news for energy supply is that the current track keeps the storm to the east of the oil production and refining regions, so it should not have much impact to regional prices or inventories. As the EIA’s energy disruption map shows, there are currently no refineries in the forecast cone, and only a handful of off-shore oil rigs in the storm’s path.

Money managers trimmed back their net-length in Brent and WTI but added to the length in both RBOB and ULSD. The decline in Brent ends a 5-week streak of increases in bets on higher prices held by the managed money category of trader.

Baker Hughes reported a decline of 2 oil rigs in its weekly report on Friday, marking a net increase of 2 rigs for the summer of 2018 in the US. The total count is 116 higher than this time last year, but levels have stagnated as drillers shift to work around pipeline constraints. Right on cue, the latest in a slew of new pipeline options to take oil from the Permian is a converted natural gas line, that will temporarily haul crude until the other projects in the works come online.

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Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

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Pivotal Week For Price Action
Market TalkTuesday, Mar 26 2024

Refined Products Seeing Small Losses Of Around A Penny While Crude Oil Contracts Hover Just Above Break Even

Energy futures are taking a breather to start Tuesday’s trading, with refined products seeing small losses of around a penny while crude oil contracts hover just above break even.

No new news on either the Red Sea shipping or Russian Refining attacks this morning, so Cocoa prices seem to be taking over the commodity headlines while energy markets wait on their next big move.

RBOB gasoline futures set a new 6-month high Monday at $2.7711, which leaves the door open on the weekly charts for the spring rally to continue. A run at the $3 mark is certainly possible in the next few weeks before the typical seasonal price peak is set just before the start of driving season.

A container ship lost power and crashed into the Francis Scott Key bridge in Baltimore this morning, causing a devastating collapse. While cargo shipping into the area will no doubt be impacted by this event, fuel supplies are unlikely to see any notable change since the 9 fuel terminals in Baltimore are primarily supplied by Colonial pipeline. Barges from Philadelphia refineries do supplement Baltimore supplies at times, and those vessel flows will be impacted at least until rescue operations are completed and the bridge sections removed from the waterway. That said, since shipping up from the Gulf Coast via Colonial is generally cheaper than shipping an NY Harbor-priced barrel south, the amount of supply disrupted by this event will be minimal.

While we’re still waiting on the official forecasts for the Atlantic Hurricane season, early reports continue to suggest that we could be in for a very busy year due to warm water temperatures and a forming La Nina pattern.

Dallas meanwhile is preparing for a different sort of disruption, with city officials encouraging companies to let employees work from home during the solar eclipse on April 8th as metroplex traffic is expected to surge. While some isolated fuel outages are certainly possible if people start panic buying gasoline they don’t need, there’s no reason to expect any widespread impact from the demand spike.

Today’s interesting read: Why AI requires a staggering amount of electricity and may create supply competition for EVs that will end up benefitting fossil fuels.

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