The Back and Forth Action Continues For Energy Contracts To Start The Week

The back and forth action continues for energy contracts to start the week, with a round of healthy buying to start Monday wiping out most of Friday’s losses. Short term charts suggest we’re in for more sideways action over the last 10 days of October, while longer term charts still suggest a good chance we’ll see lower prices ahead.

If you need a bullish headline to pin the early buying on, you can point to Saudi Aramco’s statements on Chinese stimulus and its positive impact on demand.

Money managers had mixed feelings on energy contracts last week, continuing to sell off crude oil length and add to the net short in diesel contracts, while RBOB saw a healthy amount of buying that pushed speculative net length to the highest level since May.

P66 reported an unplanned upset at its LA-area refinery over the weekend, which is the same facility the company announced last week would be shut down at the end of 2025, coincidentally just a day or so after the state passed minimum inventory laws. Meanwhile, Marathon reported to local regulators that it was planning a week’s worth of flaring at its Carson CA facility as repairs are being made.

Baker Hughes reported an increase of 1 oil rig working in the US last week, while natural gas rigs declined by 2. Of the 482 oil rigs active in the US, 304 of them are located in the Permian basin of TX and NM, which saw its rig count hold steady for the week. The start-up of the new Matterhorn pipeline that carries natural gas from the Permian is expected to relieve a major bottleneck and allow oil production to increase in the coming year, although a WSJ article this morning suggests the industry will remain cautious given the current excess of production capacity globally.

Ethanol prices reached their lowest level in almost 7 months last week. US Farmers are rapidly wrapping up the harvest of what is expected to be the largest corn and soybean crops on record, which is creating short term storage challenges for several grain facilities. The rapid pace of the harvest has not spilled over into the diesel arena however as both Group 3 and Chicago ULSD basis values remain in negative territory.

Hurricane Oscar made landfall in Cuba Sunday as a category 1 storm, further complicating the island nation’s power crisis, but is expected to hook north and east and not threaten the US coast.