Bearish Positioning In Diesel Contracts By Large Speculators

Energy futures are ticking modestly lower to start the week after a 5 day rally that added nearly 14 cents to diesel prices and a dime to gasoline.

China’s National Petroleum Corporation (CNPC) released a report Friday suggesting that refined product demand in the country had peaked in 2023, ending a decades long run of growth that drove increases in global consumption. That report also suggests that the country’s oil imports will peak in 2025, 5 years earlier than previous forecasts as the country’s population declines combine with alternative fuels and EV’s to rapidly end the continuous increases in demand the world has become accustomed to.

Bearish positioning in diesel contracts by large speculators was the most notable item in the CFTC’s Commitments of Traders report, with more than 33,000 new short positions added in ULSD and Gasoil (Europe’s ULSD equivalent) during the week. Since the COT data is compiled as of Tuesday, those new shorts in distillates had to suffer through at least 3 straight days of losses after making those bets. On the flip side, the producer & merchant category of trader has reduced their short position on ULSD to the lowest since February 2020, with the apparent bet that diesel prices won’t continue to drop in the months ahead.

The latest armed conflict in Libya caused a fire at the 120mb/day Zawiya oil refinery, forcing the country’s national oil company to declare force majeure. So far, there’s no indication that the country’s oil exports have been disrupted by the fighting which should keep a lid on any impact to futures.

Baker Hughes reported an increase of 1 natural gas drilling rig active in the US last week, while the oil rig count held steady at 482 following last week’s healthy increase.

Venture Global announced startup of its LNG production facility in Plaquemines parish LA Friday, marking the 8th active export facility in the US. That project is the first of 5 new facilities in the US that are poised to nearly double export capacity of LNG in the next 4 years from the US, with Mexico and Canada also set to bring 5 more facilities online during that time.

Marathon reported unplanned flaring at its Wilmington CA (LA-area) refinery Friday night. That flaring appears to have ended over the weekend with the cause and duration unknown. Last week the company announced 2 weeks of planned flaring at its adjacent Carson facility, which combined makes the largest refining complex on the West Coast.