Gasoline Futures Are Attempting To Lead The Energy Complex Higher This Morning

Gasoline futures are attempting to lead the energy complex higher this morning, trading up more than 9 cents/gallon, after finishing a 3rd straight week with heavy losses that have brought some much-needed relief at the pump.   Crude oil contracts are trying to join the gasoline rally with WTI briefly rising back above the $100 mark, while diesel prices are resisting the pull higher so far with prompt ULSD futures down 2 cents in the early going after rallying overnight. 

Weekly charts suggest we may now be in the early stages of a sideways summer pattern, which would be marked by choppy back and forth action that ultimately does little to change prices until the range is broken.   With few options to solve the global fuel supply shortages save for a slowdown in demand (aka a recession), there’s a good chance we see prices ultimately rebound heading into the fall. 

Money managers seem to have agreed with that assessment last week, drastically reducing their short positions across the board, driving a large increase in net length after heavy liquidation in the past several weeks.  So far that change in speculative interest looks like profit taking by those that bet on the recent price fall, but we’ll need to see open interest pick back up from the current 5-year lows before we can say that the big money funds are truly back in the energy game.  

The stare-down between Russia and Europe continues to be the big story on the supply side of the energy equation, with daily changes to various product flows, and guesses as to their impact continuing to influence prices.   A Rystad Energy report this morning takes a closer look at various scenarios for European natural gas supplies, and recaps the other options in the works to replace Russian imports.  An EU official indicated the region could end Russian fuel oil and coal imports in the next few weeks, well ahead of the agreed-upon deadline.  European tanker companies are racing to move as much petroleum as they can to China and India before EU sanctions kick in.  

Baker Hughes reported a net increase of 2 oil rigs working in the US last week, while natural gas rigs held steady for a 2nd straight week.  Oklahoma gets credit for most of the oil increase last week, while Louisiana and New Mexico both saw declines.

After dominating headlines through much of the pandemic, concerns over “clean” energy supplies have taken a backseat to concerns over energy supplies.  The latest casualty:  Several companies combining two things people only pretend to understand, carbon credits and cryptocurrencies, have stalled out due to the crash in digital currency markets.

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