The Energy Complex Is Green Across The Board This Morning

The energy complex is green across the board this morning with the distillate contract leading futures higher with over 1% gains to start the day. US gasoline and crude oil benchmarks are tagging along, both boosting prices about .7% this morning, as a weakening dollar takes the credit for positive price action.

Not all quiet on the Atlantic front: while Hurricane Earl came and went without causing any damage to energy infrastructure, there are two areas of interest that have potential for development, heading this way. While they don’t pose an immediate threat, both disturbances are positioned squarely in the historical origin range for some of the largest storms we have experienced.

Baker Hughes’ total US rig count dropped by one last week, the second consecutive week of decreases in active oil production plants. The reactivation of platforms has slowed down over the past few weeks, mirroring the drop in oil prices, disincentivizing some from starting their drills.

Money Managers trimmed their net positions in all but one of the major petroleum futures contracts last week. West Texas Intermediate crude oil saw the only increase in net positions while speculators telegraphed much more bearish sentiment in its European counterpart, cutting their bets on higher prices by nearly 8%. The refined product positions saw either double digit percentage drops in long positions or double digit percentage gains in short positions, signaling that the “smart money” expects lower prices in the short term.

The Chinese response to their increased COVID-19 problem remains one of the go-to topics for headlines as of late. Demand concerns due to new lockdowns are taking credit for the weakness in energy prices we’ve seen since June this year. Several other fundamental drivers remain in flux however:

• Will Russia respond to the West’s price cap proposal ?
• Will OPEC+ maintain the production levels or continue to tweak them ?
• Will a nuclear deal be made with Iran , releasing some of their oil production back into the market?

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