Morning Highlights
Morning Highlights

Energies down as net longs leave market


Michael Dix

Mar 14, 2022

Outlook: Energies are down sharply this morning as news of potential progress in peace talks between Russia and Ukraine circulate. Much of the war premium has come out of the market in my estimation. Several South American countries have come to the market in an effort to buy Russian energy products at a discount including Brazil and Argentina. European countries are expected to place further sanctions on Russian assets but will not put an import ban in place.

Crude

  • Russia has asked China for financial and military aid
  • Russia and Ukraine continue to talk to try and negotiate a peace deal.
  • GS Commodities estimates that if negotiations fall apart there is an $8 upside to crude in the short term and long term they are predicting $135 per barrel.
  • Iran Nuclear Deal talks have paused. Iran could bring back 1 million barrels per day to the market over time if sanctions are lifted.
  • China is seeing a new Covid variant spread across the country with 1337 new cases which are more than all reported cases in 2021 for China.
  • India has said that they are willing to buy Russian oil if it becomes available.
  • As of 9:20 am CST: Brent crude oil down $8.48 to $104.20, US dollar index down $0.233 to 98.894 while the nearby e-mini S&P 500 futures contract is up 29 points to 4229.

Diesel

  • Diesel saw a slide of $1.24 last week as much of the war premium may have been pulled out.
  • Diesel continues to have the tightest global supply.
  • Net longs dropped by nearly 11,000 contracts from money managers and nearly 15,000 from non-commercial traders.

Gasoline

  • With prices surging at the pump the Biden administration is expected to suspend federal gas taxes.
  • Gasoline futures have the lowest net long positions since last December. Signaling a possible move higher.

Propane

  • Conway finished last week down 17.5 cents. Propane has started this morning off 7 cents
  • Stocks are still at historically low levels of 35 mbbls

Natural Gas

  • No major weather changes to the forecast over the weekend, GFS lost 15 HDD’s. Some colder than normal weather will linger in Texas and the Rocky Mountains for the next few days.
  • With warmer weather ahead we can expect to see a lessening of demand.

Long Liquidation: Last week saw the largest liquidation of net longs in Brent Crude since tracking began in 2011. This could signal an eventual turnaround and revert back to the bull trend.