March Trading Wrapping Up With Modest Strength In Energy Futures

March trading is wrapping up with more modest strength in energy futures with most Nymex contracts hovering near their highs for the month and leaving the door open to a strong rally if resistance near current values doesn’t hold. Equity markets are pointing sharply lower to end the month, so don’t be surprised if there is spillover that takes the wind out of the early rally in refined products.

There was plenty of madness in March and yet prices are set to end the month very close to where they started with RBOB down less than a penny from its open, while ULSD is down just a few cents. Now we will get to wait and see if more foolishness will follow in April with the latest round of tariffs set to kick in Wednesday. It’s expiration day for April RBOB and ULSD futures, so be sure to watch the May (RBK/HOK) contracts for price direction if your local market hasn’t already rolled.

California gasoline basis values continued to rally Friday as the state struggles to deal with numerous unplanned refinery disruptions amidst the state’s long-term plan to disrupt refinery operations. San Francisco spots are now trading north of 70 cents/gallon above futures while LA-area spots are holding north of 60 cents/gallon.

Money managers were decidedly bullish on European petroleum contracts in the latest CFTC report adding more than 84,000 contracts of net length between Brent crude and Gasoil (ULSD equivalent) with new long positions making up most of the increases. Nymex contracts saw some buying of both RBOB and ULSD contracts by large speculators, while WTI saw a decrease. Despite recent purchasing by hedge funds and other large speculators, the net length held in all of the big 5 petroleum contracts trails year-ago levels by a healthy margin.

Large speculators seem to be betting that a joint effort by the Oil and Ag lobbies will convince the EPA to increase bio-mass-based diesel targets starting in 2026 with a large increase in net length held by money managers in the D4 RIN contract. The hedge funds may be hedging those bets by shorting the D6 (ethanol) RIN contracts, as they as a large decline in speculative length in last week’s report. Both D4 and D6 values recovered from an early March sell-off and are now approaching a 15 month high after the U.S. President reportedly told the two groups to reach an agreement on the next round of renewable targets. California’s LCFS credits saw a modest increase in speculative length last week, while CCA’s in both California and Washington saw small decreases.

Baker Hughes reported a net decline of 2 oil rigs active in the U.S. last week, while natural gas rigs increased by 1. While unimpressive by historical standards, the 103 rigs drilling for natural gas in the U.S. does mark the highest count since April of last year, and adds a modest bit of evidence to the predictions that U.S. drillers may focus more on gas as export LNG capacity increases this year.