WTI Punched Through 200 Day Moving Average
WTI managed to punch through its 200 day moving average Tuesday, sparking the first notable price rally in crude and refined products in the past couple of weeks. While this may be the most interesting move in a while, the gains are small on the weekly and monthly charts, and don’t change the long-term price outlook that’s torn between supply concerns in the Middle East, and demand concerns just about everywhere else.
Today will be the busy day for news with the DOE’s weekly status report due out this morning and the FED decision this afternoon. Pretty much everyone is expecting at least a 25 basis point cut from the FED, so we may not see much market movement unless something else happens, or the FOMC changes their forward outlook in the statement.
Today is also the last trading day for August 19 RBOB and ULSD futures, so look to the September (“U”) contracts to see where the real action will be that should drive physical prices at the racks tomorrow.
The API was said to show inventory draws across the board last week with crude stocks down 6 million barrels, gasoline down 3.3 million and diesel down 890k. The DOE’s weekly report is due out at its normal time.
The tropics are starting to heat up. Disturbance 1 that’s headed towards Florida is still only given a 10% chance of development while a second disturbance is given a 50/50 shot at reaching storm status over the next 5 days. The first system looks like it will stay off of the SE coast and be a non-issue, while it’s too soon to say if the 2nd has a chance to thread the needle in the Caribbean and become a threat to the US.
A common theme among the earnings reports from refiners in the past couple of weeks has been the anticipated impact of the IMO bunker fuel changes coming at the end of the year. Meanwhile, Indonesia has already announced its plans to not enforce the new rules, which some worry may be the first of many that may nullify the efforts to clean up the fuels used at sea.
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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.