Mixed Start To The Week For Energy Futures, While Money Managers Seem Uncertain How To Play This Market

It’s a mixed start to the week for energy futures that continue to struggle to find direction after a strong recovery bounce ended with a whimper last week.

Friday’s sell-off in ULSD wiped out the gains made earlier in the week, and the contract ended with a 7th straight weekly decline. While prices are still 15 cents above the 2023 lows, the inability to sustain a recovery rally keeps the bear market trendlines intact, and the risk of a slide to $2 very much alive.

RBOB futures look less bearish than diesel on the charts but are no longer suggesting that a run toward $3 is in the cards, even though we’re just approaching the driving season.

Money managers seem uncertain about how to play this market, adding new length to ULSD and WTI contracts, but shedding long positions in RBOB and Gasoil. Brent meanwhile saw a huge influx of more than 26,000 new short positions added last week, which pushed the net length held by large speculators to the lowest level of the year. RBOB gasoline saw a similar spike in new short positions as the big money funds seem to be betting the spring gasoline rally ended 3 weeks ago. Open interest on petroleum contracts has been slowly increasing for most of the year as the return to more tolerable volatility levels has allowed some players back on the field.

Baker Hughes reported a modest decline of 2 oil rigs active in the US last week, which brings the total count to its lowest level in nearly a year. Natural gas rigs meanwhile saw a big drop of 16 rigs last week, more than 10% of the total active US count, which dropped that number to a 13 month low.

Magellan is being acquired by pipeline operator Oneok (pronounced one oak) in a deal valued at nearly $19 billion combining two of Tulsa’s largest companies. The two companies have a great deal of geographical overlap in their systems, but since Oneok is primarily a natural gas pipeline operator, the foray into refined product shipping offers diversification via consolidation, and more importantly should allow for FTC approval.

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