Refined Products Holding Close To Break Even While Oil Prices Are Losing Just Under 1%

Energy markets are vacillating this morning with refined products holding close to break even while oil prices are losing just under 1%.

Negotiators are meeting in Egypt this week to try and hammer out a truce in Gaza, even as Israeli airstrikes intensify. The Red Sea has continued to be active after a few weeks of relative calm, with multiple strikes reported over the weekend and another this morning.

Ukrainian drones targeted two more Russian oil refineries over the weekend, and at least one facility was reportedly taken offline as a result which means two things: Ukraine isn’t listening to US requests to stop targeting refineries, using nets to protect refineries isn’t working yet.

The CFTC’s weekly Commitments of Traders report gave a glimpse into the speculative liquidation (AKA clowns exiting the Volkswagen) that occurred in energy contracts after the direct conflict between Iran and Israel fizzled. Money managers saw heavy long liquidation, with both Brent and WTI dropping nearly 10% on the week. The only contract to see an increase in net length in last week’s report was ULSD, which had been the weak link in the complex for most of the year. ULSD did see a healthy amount of length liquidated, but that was offset by short covering as prices reached 5-month lows to create a very small net increase.

Baker Hughes reported a drop of 5 oil rigs and 1 natural gas rig drilling in the US last week, with Louisiana accounting for the majority of the decline. Pipeline capacity continues to be a limiting factor for many producers, and an RBN energy blog this morning suggests that things are about to get worse in the Permian when major pipeline maintenance occurs in June.

A fire was reported at CVR’s Wynnewood Oklahoma refinery over the weekend, although it’s unclear if the deadly storms that swept through the region played a role in that event.

Marathon’s Galveston Bay refinery reported an upset Friday that knocked a coking unit offline, but said operations were already resuming. That facility was the most-frequent TCEQ reporter last year but has been relatively quiet over the past couple of months.

Today’s interesting read courtesy of the Financial Times: How Europe solved its Russian gas crisis.

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