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A surprise increase in Distillate inventories fueled a sell off across all pits yesterday. Distillates grew by 300k barrels while most expected a decline of about 1.5m. This, coupled with surprisingly low demand numbers (down almost 7%) saw the pit erase the roughly $.15 in gains added in the last two weeks. It appears that we are continuing that slow progression downwards with mindless swings in between.
On February 24, 2022 Russia invaded Ukraine thrusting oil markets into one of the most volatile periods in decades, reaching prices never seen before. At just over a year later, the APR contract is just $.01 off of where we were when this all started. (see close on 2.24.23 below and chart) . The circumstances around the recent drop are obviously derived from the recent banking meltdown.
Futures markets appear to be content with being rangebound as the last month has seen us bounce back and forth by about $.25 in Diesel. The last four days has seen diesel futures fall almost $.15 in value.
We are now a year removed from Russia’s invasion of Ukraine, and like many times in the past, we seemed to have made it through an extremely volatile period. Since the onset of this “new normal” we have stressed the need to have a strong relationship with your supplier to help navigate the ever changing landscape. Recall that we said the $2.65 level for the ULSD contract is a key support level, we have now hit that four times and bounced off it (see below) and the market is truly searching for direction with a $.25 range the last few weeks.
While it might be hard to think about cold weather with temperatures in the 60s across the region, keep in mind that all too often, we still have an arctic blast come through late February into March. Staying the course with a winterized fuel is critical to a smooth operation this time of year.
Diesel futures continue to oscillate on both technical and fundamental influences. We had mentioned to many, don't be surprised if the March contract touches the support level of $2.65 area when in it was trading above $3.25 in late January. Low and behold on Monday it bounced off $2.6649 before jumping another $.20 over the next two sessions.
The wild ride continues as in just under two weeks, we have erased $.50 of value on the futures market. Front month ULSD fell $.1937 yesterday setting us up for a test of key technical support levels.
Even though Diesel futures have fallen roughly $.20 in the last two days, we are still almost $.40 higher than the beginning of the month. Still optimistic that we will considerably lower in the coming weeks, however.
Diesel Futures have risen just over $.25 in the last week, for largely the same reason as they tanked the week before. China is now lifting most Covid restrictions, as traders now see demand picking up on the world basket. Even though we are still seeing huge weekly swings, the overall temperature of Distillates looks to be cooling off since trading some $.75 higher than presently mid summer (see below).
Extreme volatility continues grip the futures markets as the USLD pit erased almost $.30 in the last two days. Even though its up about $.05 currently, expect this sell off to continue for the short term.