Traders Are “Mulling” Ahead Of What Seems To Be A Quiet Start To The Week
Refined product futures are trading slightly higher this morning with the prompt month distillate contract adding 2 cents to start the day and gasoline trading higher by about a penny. WTI and Brent futures are trading just on the red side of flat with a lack of headlines to push any inspired trading. Persistent inflation and a robust American economy are reported to be the factors traders are “mulling” ahead of what seems to be a quiet start to the week.
Money managers placed their bullish bets on American crude oil prices last week, adding new long positions while cutting existing shorts. The opposite is seen in refined products, however, as the ‘smart money’ added new short interest in both RBOB and HO, dropping their total net position in both contracts. Of note: the open interest in the WTI Midland contract, which began trading in 2018, hit a new all time high last week, but the speculative funds seems to be keeping away with the other category of traders making up the vast majority of positions held.
Congressional leaders are being called to the White House this week as Biden attempts to make some sort of headway in avoiding a partial government shutdown Friday. In addition to the Ukrainian Aid Package, funding for several agencies and programs are up for vote. There could be material economic impact if a consensus is not reached.
Baker Hughes reported a net increase of six oil production platforms last week, two of which came online in the Permian Basin region.
RIN prices continued to slide last week with both the D6 and D4 falling to ~$.40 per credit. There is little on the horizon to suggest this trend won’t continue, barring any mandate changes from the feds.
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View AllWeek 18 - US DOE Inventory Recap
Crude Oil, Gasoline, And Diesel Benchmarks Are All Trading >1% Lower To Start The Day
Energy prices are sinking again this morning, albeit with a little more conviction than yesterday’s lackadaisical wilting. Crude oil, gasoline, and diesel benchmarks are all trading >1% lower to start the day with headlines pointing to an across-the-board build in national inventories as the source for this morning’s bearish sentiment. The Department of Energy’s official report is due out at its regular time this morning (9:30am CDT).
WTI has broken below its 100-day moving average this morning as it fleshed out the downward trend that began early last month. While crossing this technical threshold may not be significant in and of itself (it happened multiple times back in February), the fact that it coincides with the weekly and monthly charts also breaking below a handful of their respective moving averages paints a pretty bearish picture in the short term. The door is open for prices to drop down to $75 per barrel in the next couple weeks.
Shortly after the EIA’s weekly data showed U.S. commercial crude inventories surpassing 2023 levels for the first time this year, their monthly short-term energy outlook is forecasting a fall back to the bottom end of the 5-year range by August due to increasing refinery runs over the period. However, afterward the administration expects a rise in inventories into 2025, citing continued production increases and loosening global markets hindering the incentive to send those excess barrels overseas. The agency also cut back their average gas and diesel price forecasts for the first time since February with the biggest reductions in the second and third quarter of this year.
The STEO also featured their famed price prediction for WTI, stating with 95% confidence that the price for crude oil will be between $40 and $140 through 2026.
Need a general indication of the global crude oil supply? Most headlines seem to be covering a shortage of a different type of oil, one that we haven’t turned into fuel (yet).
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The Perceived Cooling Of Regional Tensions In The Middle East Area Attributing To The Quiet Start To Today’s Trading Session
The energy complex is drifting lower this morning with RBOB futures outpacing its counterparts, trading -.9% lower so far to start the day. The oils (WTI, Brent, heating) are down only .2%-.3% so far this morning.
The perceived cooling of regional tensions in the Middle East area attributing to the quiet start to today’s trading session, despite Israel’s seizure of an important border crossing. A ceasefire/hostage-release agreement was proposed Monday, and accepted by Hamas, but rejected by Israel as they seemingly pushed ahead with their Rafah offensive.
U.S. oil and natural gas production both hit record highs in 2023 and continue to rise in 2024, with oil output currently standing at 13.12 million barrels per day and January 2024 natural gas production slightly exceeding the previous year. With WTI currently changing hands at higher than year-ago levels, this increased production trend is expected to continue despite a decrease in rigs drilling for these resources.
Less than a week after the Senate Budget Committee’s hearing centered on the credibility of big oil’s climate preservation efforts, a major oil company was reported to have sold millions of carbon capture credits, without capturing any carbon. Fraud surrounding government subsidies to push climate-conscious fuel initiatives is nothing new, on a small scale, but it will be interesting to see how much (if any) of the book is thrown at a major refiner.
Today’s interesting read: sourcing hydrogen for refining.
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