Energy futures are trying to move higher again this morning, after a failed rally attempt on Thursday. The recovery in prices after reaching their lowest levels since November this week puts us back into more neutral territory near term, although charts still give slight favor to more selling unless WTI can get back above $50 soon.
A fire at a Canadian Oil facility earlier in the week is now expected to back out more than 10 million barrels of imports into the US over the next 2 months. That news has provided strength to Canadian synthetic crude prices, and to similar spec grades like Bakken but does not seem to be a major influence on WTI futures as those barrels don’t directly impact Cushing, and a 10 million barrel draw down from current US inventory levels would still leave them above last year’s record highs.
Meanwhile, the fire at LyondellBasell’s Houston refinery had US gasoline prices moving higher early Thursday, but those gains were wiped out in the afternoon as it appears there won’t be a long term impact to production. While there may not be a lasting price influence from the fire, it certainly isn’t helping the company’s attempts to sell the facility.
Selling refineries has become a news theme this week as executives lay out plans to shareholders to improve profits after a tough year for many US Producers. While Delta Airline’s CFO is denying reports that it intends to sell its plant outside of Philadelphia after a brutal quarter, Calumet is reportedly shopping its refinery in Superior WI, not long after it sold its brand new plant in ND due to disappointing earnings. While the cyclical nature of the refining business is nothing new, this recent downturn shows just how difficult it can be for businesses to manage through the country’s transition to an exporter of petroleum.
Late this afternoon we’ll get to see how the managed money weathered last week’s storm of selling when the CFTC releases its commitments of traders reports. The pace of the sell-off after being stuck in a narrow trading range for so long has most analysts anticipating that heavy liquidations from the speculative funds betting on higher prices was a major contributor to the decline. The fact that prices held this week could mean that those funds were able to withstand the losses, or it could simply be that prices needed to consolidate before making their next big move.