WTI was knocked back to reality Monday after word that the Keystone pipeline would restart much earlier than expected. That selling leaked over into the rest of the complex briefly overnight, although most of those losses were erased this morning, keeping the bullish trend lines intact.
TransCanada released a statement yesterday with plans to restart the Keystone pipeline today, which knocked WTI prices down more than $1.50/barrel from the highs set on Friday. The news seemed to catch many by surprise as local regulators & industry reports had been suggesting that it could be weeks before the pipeline returned to service. The Pipeline & Hazardous Materials Safety Administration (PHMSA) had employees at the spill site for the past 10 days, and is said to have approved the restart plan.
The money manager category of trader (aka speculators) made small reductions in their net long holdings (bets on higher prices) of energy contracts last week. The small declines leave the net positions near record highs for several contracts, and those funds have been rewarded during this latest rally. So far these funds, which are often viewed as being fickle, has proven resilient to several pullbacks this year. The big question for this week is if the hot money will stay in energy after the OPEC announcement, or find another asset class to play with.
Thursday is expected to be a busy day for market-moving news with the OPEC announcement from Vienna due out around 8 am central, and the EPA’s final RFS volumes for 2018 due sometime later in the day. This would mark the first time in several years that the agency released the volume requirements by the November 30 deadline set in the law. Last week the agency made its official ruling that the point of obligation for the RFS would not change as several refiners had been lobbying for over the past 2 years. Ethanol RINs have been bouncing back and forth between the high 80s and low 90s for the past 2 weeks as traders wait to see how the EPA will walk the political tightrope.