Recovery Rally Runs Out Of Steam

The 2-day recovery rally in energy futures ran out of steam Monday, and now looks like a dead cat bounce. Energy and Equity markets around the world are selling off after the latest signs of escalation in the US/China trade war, and more troubling economic data from Europe.

While the trade war is often seen as more of a threat to global energy demand as it hinders economic growth, the recent sanctions added to Chinese oil tankers is creating a squeeze on certain heavy crude grades, and sending rates for VLCC tankers (the largest in the world) soaring. So far that squeeze isn’t showing up in the futures market, but could have trickle down effects for some refiners if those sanctions continue.

Not over yet: the National Hurricane center is monitoring 3 storm systems in the Atlantic this week, two just off the US East Coast, one of which looks like it cause some trouble for boat traffic around the NY Harbor and New England regions, even if it’s unlikely to become a hurricane.

It’s data deluge week, the EIA will publish its monthly Short Term Energy Outlook later today and the API releases its weekly inventories this afternoon. Tomorrow we’ll get the DOE’s weekly status report, Thursday brings OPEC’s monthly report and Friday we’ll get the IEA’s monthly oil market report. At this point, the most important question seems to be will anyone care, or will fear keep driving the action?

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