What A Difference A Year Makes

Energy futures are ticking modestly higher to start the quiet & abbreviated Christmas Eve trading session. Physical trading in refined products is non-existent so far and is expected to remain that way with several pipeline operators taking both Tuesday and Wednesday off.

What a difference a year makes: Christmas Eve 2018 saw a crescendo of selling that ultimately marked the bottom of the energy and equity markets after a brutal 4th quarter selloff. This year U.S. equities are sitting at all-time highs and WTI is holding steady above $60. In addition, volatility readings reached multi-year highs on Christmas eve in 2018, while this year both asset classes are at the bottom end of their range for volatility.

Speaking of different: RBOB gasoline continues its counter-seasonal strength today, trying to drag the rest of the complex higher even as we enter the weakest fundamental period of the year when demand crumbles for a few weeks, while supplies surge due to increased refinery production and butane blending. With both January and February RBOB holding above $1.70 this week, there is room on the chart to see another 10 cents of upside in gasoline before year end, despite the fundamentals suggesting we should see a pullback in prices soon.

The API’s inventory report will be released at its normal time this afternoon, but trading will already be shut down for the day due to the early holiday closing. That report might drive the early action when trading resumes after Christmas. The DOE’s weekly report is delayed until Friday.

Today’s interesting read: The Permian’s nat gas problem as oil drilling slows.

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