Money Managers Were Piling Into Crude Oil Contracts As They Rallied To A 5-Month High Last Tuesday

It’s a mixed start to the week for energy markets with ULSD trying to rally, up 2 cents in the early going, while crude oil prices cling to small gains, and gasoline prices show small losses in the early going.

Ukraine shrugged off the reported requests from US officials to stop blowing up Russian refineries, with at least 2 more plants targeted over the weekend, one of which was forced to shut down a crude unit as a result. Estimates vary, but the production taken offline by the refinery attacks so far in March is somewhere in the range of 400,000 to 700,000 barrels/day, which has pushed total output in the country to the lowest in a year. Perhaps most notable about the weekend attacks is that the refineries were more than 500 miles from Ukraine, which highlights the expanding capabilities of Ukraine’s drones.

As expected, Money managers were piling into crude oil contracts as they rallied to a 5-month high last Tuesday. The large speculative category of trader added more than 100,000 contracts worth of net length in WTI and Brent, most of which was new long positions. The net length in Brent is now at the highest level we’ve seen in a year but remains well below the historical levels which suggests the funds have plenty of more money to bet if they choose to do so.

The big funds were also piling into Gasoil (Europe’s version of ULSD) contracts last week, with a net increase of nearly 25,000 contracts, split fairly evenly between new longs and short covering. RBOB contracts also saw a healthy increase in length, although more than 5,000 new short positions were also added with some funds apparently betting that the 6-month highs reached last week will mark the peak of the spring rally. ULSD remains the least favored of all the petroleum contracts, with minimal change last week despite the big move in Gasoil.

Baker Hughes reported a decline of 1 oil rig and 4 natural gas rigs drilling in the US last week. While the oil rig count has seen some modest recovery so far this year, the decline in nat gas rigs last week puts the total at its lowest level since January 2022 as producers struggle with low prices while they anxiously await more export capacity to help US natural gas prices to start approaching those in the rest of the world.

A trio of refinery upsets were reported to TX regulators Friday.

Exxon reported an upset at its newly expanded Beaumont TX facility, although it’s unclear if operating units were forced to slow as a result.

Total meanwhile continues to struggle to get its Pt. Arthur facility back online, more than 2 months after the January cold snap, reporting a leak Friday that forced it to shut down a crude unit.

Valero reported an upset at its McKee refinery in the TX Panhandle, but it appears that only the facility’s flare gas recovery system was impacted so it shouldn’t have a notable impact on output.

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