Cocktail Of Bearish News Sends Financial Markets Lower

A cocktail of bearish news sent financial markets around the world sharply lower on Monday, and energy futures had their biggest 1 day declines since that fateful week in April 2020 when WTI went negative, and products were trading in the 60 cent range. So far equity markets seem to be faring better than energy contracts, with most US indices seeing a recovery bounce this morning, while energy futures have already given up their overnight gains, and appear to have ended their 8 month bull run. 

Now that the upward trend is broken, the June lows at $2.10 for RBOB and $1.95 for ULSD look like the next natural point of support, and if they break, it looks like we’ll head towards $1.90 for RBOB and $1.80 for ULSD, which is the area of congestion that held prices for about a month in the spring.

In some cases, these large sell-offs can create a snowball effect as speculative traders are forced to liquidate positions to meet margin calls, which creates more pressure to the downside, and may be what we’re seeing this morning as futures continue to slip further into the red. With money managers steadily increasing their long bets on energy prices this year, perhaps the determining factor on whether or not we see another big drop in the coming weeks is if those funds have the fortitude and finances necessary to ride out the storm. 

RINs and Carbon credits also came under pressure during the widespread sell-off, albeit on a smaller scale than what we saw from crude and products, in another sign of the widespread liquidation that seemed to grip markets globally throughout the day.  

Click here to download a PDF of today's TACenergy Market Talk.