Traders Look To What Comes Next
It’s a quiet start to Thursday trading with energy futures seeing very small losses and equity futures pointing to small gains. The markets seem to be breathing a sigh of relief after Wednesday’s inauguration went peacefully, and perhaps traders are also just pausing to see what might come next as the business of getting the next administration approved by Congress proceeds with the backdrop of a race between COVID treatments and new infections playing out around the world.
Nothing too surprising or groundbreaking from the list of executive orders signed on the first day of the new U.S. President’s administration. Energy did play a prominent role with orders that will effectively halt the Keystone XL pipeline construction (again), ban oil & gas development on federal monument land, along with directions for agencies to “consider revising fuel economic and emissions standards.” From the markets’ lack of reaction, it seems like these announcements were all well telegraphed ahead of time, and there’s little substantial change that will impact the country’s supply near term.
You can read the API’s response to the executive orders here: https://www.hydrocarbonengineering.com/gas-processing/21012021/api-comments-on-biden-executive-orders/
Speaking of the API, their weekly inventory estimate was reported to show builds for oil and refined products last week with crude stocks of 2.5 million barrels, gasoline up 1.1 million and distillates up 800k. Those builds are getting some of the credit for the selling in energy markets this morning, but in fact this selloff started earlier Wednesday afternoon before the APIs were released, with most energy contracts giving up most of their early gains before settlement. That pullback is another sign that the upward momentum is waning, but at this point the charts are giving little input as to whether this is just a pause, or the start of a trend reversal.
The DOE’s weekly report won’t be out until Friday morning due to the MLK holiday and inauguration.
Click here to download a PDF of today's TACenergy Market Talk.
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
Energy Futures Are Drifting Quietly Higher This Morning
Refined Products Holding Close To Break Even While Oil Prices Are Losing Just Under 1%
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
The energy complex is trading modestly lower so far this morning with WTI crude oil futures leading the way, exchanging hands $1.50 per barrel lower (-1.9%) than Tuesday’s settlement price. Gasoline and diesel futures are following suit, dropping .0390 and .0280 per gallon, respectively.
A surprise crude oil build (one that doesn’t include any changes to the SPR) as reported by the American Petroleum Institute late Tuesday is taking credit for the bearish trading seen this morning. The Institute estimated an increase in crude inventories of ~5 million barrels and drop in both refined product stocks of 1.5-2.2 million barrels for the week ending April 26. The Department of Energy’s official report is due out at it’s regular time (9:30 CDT) this morning.
The Senate Budget Committee is scheduled to hold a hearing at 9:00 AM EST this morning regarding a years-long probe into climate change messaging from big oil companies. Following a 3-year investigation, Senate and House Democrats released their final report yesterday alleging major oil companies have internally recognized the impacts of fossil fuels on the climate since as far back as the 1960s, while privately lobbying against climate legislation and publicly presenting a narrative that undermines a connection between the two. Whether this will have a tangible effect on policy or is just the latest announcement in an election-yeardeluge is yet to be seen.
Speaking of deluge, another drone attack was launched against Russian infrastructure earlier this morning, causing an explosion and subsequent fire at Rosneft’s Ryazan refinery. While likely a response to the five killed from Russian missile strikes in Odesa and Kharkiv, Kyiv has yet to officially claim responsibility for the attack that successfully struck state infrastructure just 130 miles from Moscow.
The crude oil bears are on a tear this past week, blowing past WTI’s 5 and 10 day moving averages on Monday and opening below it’s 50-day MA this morning. The $80 level is likely a key resistance level, below which the path is open for the American oil benchmark to drop to the $75 level in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Energy Futures Are Drifting Quietly Higher This Morning
Energy futures are drifting quietly higher this morning as a new round of hostage negotiations between Israel and Hamas seem to show relative promise. It seems the market is focusing on the prospect of cooler heads prevailing, rather than the pervasive rocket/drone exchanges, the latest of which took place over Israel’s northern border.
A warmer-than-expected winter depressed diesel demand and, likewise, distillate refinery margins, which has dropped to its lowest level since the beginning of 2022. The ULSD forward curve has shifted into contango (carry) over the past month as traders seek to store their diesel inventories and hope for a pickup in demand, domestic or otherwise.
The DOE announced it had continued rebuilding it’s Strategic Petroleum Reserve this month, noting the addition of 2.3 million barrels of crude so far in April. Depending on what the private sector reported for last week, Wednesday’s DOE report may put current national crude oil inventories (include those of the SPR) above the year’s previous levels, something we haven’t seen since April of 2022, two months after Ukraine war began.
The latest in the Dangote Refinery Saga: Credit stall-out, rising oil prices, and currency exchange.
Click here to download a PDF of today's TACenergy Market Talk.