It’s been a choppy overnight session for energy prices that find themselves caught between suddenly bullish banks, and a suddenly shaky stock market. Refined product prices were moving higher most of the night, but are selling off in the wake of the January jobs report. Although the midweek bounce in oil and refined product prices kept a technical breakdown on the shelf for now, Brent crude did set a lower low and lower high on its weekly chart for the first time in 8 weeks, in another sign that the complex could be in the process of topping out.
The renewable fuel drama continues to play out in the headlines and media this week as EPA administrator Scott Pruitt reiterated his intentions to reform the way RINs are used to account for the RFS during a TV interview Thursday morning. Ethanol RIN values held in the low 60s, near their lowest levels since last May, but sellers seem somewhat hesitant after several head-fakes last year as the EPA struggles to appease the competing factions in this debate.
US equity markets are pointing to a sharply lower open, and since the cross-asset class correlations have returned over the past several weeks, this very well might drag on energy prices as well. With the record amount of speculative length already betting on higher petroleum prices, the potential is present for a big move lower should fear return to the stock market and spark liquidations across the board.
The BLS reported another month of steady job growth in January, and steady unemployment rates. In the minutes following the report, US equity futures dipped even further as we appear to be seeing a bit of “Good news is bad news” now that the FED is raising interest rates, just as we saw years of “Bad news is good news” from stocks when central banks were focused on pumping money into the global economy.