Stock Futures Pull Back Following Vaccine News

The sideways action continues in energy markets after an attempted rally Monday morning failed to build any momentum and most gains were wiped out in the afternoon. This morning it’s the RBOB gasoline contract trying to lead the rest of the complex higher, with penny gains while ULSD moves back and forth across the breakeven line. Charts continue to give a neutral outlook, suggesting more back and forth trading in the near future.  

There are lots of headlines about the U.S. looking to pause use of the J&J COVID vaccine, and while stock futures did pull back overnight following that news, the moves have been minor and don’t seem to be having any trickle-down effect on energy markets at this point. 

OPEC increased its global demand estimates in the latest monthly oil market report saying, “Gasoline is projected to be the key driver for oil demand recovery beginning with the onset of the summer driving season. Diesel will also provide support, mostly based on economic improvements stemming from the implementation of fiscal stimulus programmes.” The report also highlighted the recovery in U.S. refinery margins over the past two months, while European and Asian refiners have not seen the same improvement. The cartel’s oil production was up 200mb/day in March, driven primarily by an increase in Iranian output as they’ve found new ways to circumvent U.S. sanctions. 

Speaking of Iranian production, there was another mysterious outage at an Iranian nuclear site over the weekend, with multiple sources suggesting another cyber-attack from Israel is to blame, just as the U.S. reopened negotiations with Iran over its nuclear program. This latest development might mean a deal is less likely and could delay the return of more Iranian oil to the market.

The beleaguered Suncor refinery outside Denver looks to have passed a big emissions test with an investigation finding the facility met its environmental permits. While that’s certainly good news, the plant is still facing lawsuits over water contamination in the community, just as it seeks extensions of its operating permits from the state. Refiners in the Midwest will be watching this story closely as the Denver metro area has become a popular home for the excess supply coming from Group 3 refineries, and removing the only refinery left in Colorado off-line would mean big opportunities for those plants.

Add another renewable diesel production facility to the growing list. Unlike most of the others that have been announced in the past couple of years however, this facility may not be sending the majority of its fuel to California, as that country’s clean fuel standard is set to start next year and will offer its own incentives for renewables.

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