Petroleum futures are displaying a modest rise in the midday of Monday, indicating the possibility of further gains due to a strong seasonal tendency for first-quarter price increases.
Speculative Skew and Market Trends
The speculative skew for West Texas Intermediate crude remains limited. Money managers currently hold less than two long positions for every sale, which is a decrease from the two-year average of 7-to-1 and a five-year average of 6.8-to-1.
Notably, market-moving headlines present a mixed outlook. While the White House warns of potential long-term dealing with Houthi attacks, factors such as slumping demand in China and an increase in layoffs in the U.S. might be causing some oil traders to remain cautious.
Contract Expiry and Current Prices
The NYMEX February WTI contract is set to expire on Monday, and it is anticipated to generate some activity. Currently, the contract has risen by $1.68 to $75.09/bbl, while the March contract has seen a $1.50 increase, reaching $74.75/bbl. Moreover, the March Brent has surged by $1.39, standing at $79.95/bbl.
Impact of Weather Forecasts
Forecasts of warmer weather across a significant portion of the U.S. this week have resulted in a slight pressure on diesel futures, with prices experiencing only modest gains. Presently, the NYMEX February ULSD contract has risen by 0.87ct to $2.6708/gal, while U.S. cash markets have noticed gains ranging from 0.75-2.5cts/gal.
Distillate Stocks Set to Decrease as Demand Rises
Market sources are anticipating that the Energy Information Administration (EIA) will announce a draw in U.S. distillate stocks in its report this week. It is expected that the demand for distillates will reach approximately 4 million barrels per day (b/d) or even higher.
However, the outlook for gasoline demand remains bleak. The EIA may reveal that refinery input decreased by over 1 million b/d last week, with estimated demand falling below 8 million b/d due to cold weather and snowy conditions that discouraged many drivers from traveling.
Nonetheless, with spring just around the corner, there is some renewed interest in purchasing motor fuel. The NYMEX February RBOB contract has risen by 5.71 cents to reach $2.2199 per gallon. Cash prices have also increased in all U.S. spot markets. Eastern markets, east of the Rockies, recorded gains of 5.75-6.5 cents per gallon, while Western markets saw an increase of 4.5-5.75 cents per gallon.
Interestingly, gasoline prices in the Midwest are significantly lower compared to the rest of the country. This can be attributed to the fact that combined gasoline and distillate stocks in the region are approximately 20 million barrels higher than what is considered normal for this time of year.
Reporting by Tom Kloza; Editing by Jeff Barber