CFTC Commitment Of Traders Report Confirmed Short Covering Was Pushing Up Pricing

It’s a quiet start to the week for energy contracts with modest gains of around a penny in the early going for refined products, while crude oil contracts are up less than 50 cents/barrel.

Houthi Rebels continue to attack ships transiting the Red Sea, with the U.S. Navy forced to rescue the crew from 2 different cargo ships that were struck over the past week.

China’s refineries slowed their run rates in May as planned maintenance and weak margins were both cited as contributing to a pullback from the world’s largest oil importer.

The CFTC’s commitment of traders report Friday confirmed that short covering by money managers was most certainly pushing up prices the week prior. WTI saw nearly half of its large speculative short positions bought back in just 1 week, while Brent’s multi-year high short bets were cut by 20%. In total, more than 62,000 crude contracts and 20,000 diesel contracts were repurchased after funds realized their bet that prices would continue sliding after they’d already hit multi-month lows was a mistake. The unwinding of the big speculators’ bets on lower oil prices will no doubt thrill the Saudi Arabian oil minister who famously threatened the “gamblers” back in 2020.

The National Hurricane Center is tracking 2 potential storm systems this week, one in the SW Gulf of Mexico is now given 70% odds of being named, but is expected to move inland over Mexico and not bring a major threat, but will bring thunderstorms to the U.S. Gulf Coast this week. The other system is only given 30% odds of development off of the coast of Georgia or South Carolina and doesn’t appear to be a threat to energy infrastructure.

The EIA published its annual U.S. refining capacity report Friday, which shows operating facilities as of January 1. It finally caught up with the Beaumont facility expansion completed more than 15 months ago, marking the largest growth in U.S. capacity in nearly a decade. Total operable capacity is still below the peak set in 2019 and is expected to drop further as the P66 Rodeo facility was converted this year, and the Lyondell Houston Refinery is once again expected to shut its doors at the end of the year. Since the government’s report is so far delayed, perhaps the most interesting part is the listing of all refineries that have closed since 1990.

Total reported 24 hours of flaring at its Port Arthur, TX refinery over the weekend. The only unit mentioned as a Flare Gas Recovery system so it appears the event won’t have a major impact on operations.

Baker Hughes reported 4 more oil rigs were taken offline in the U.S. last week, bringing the total count to a 2.5-year low at 488. Natural gas rigs were unchanged on the week at 98, the lowest total since October 2021.

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