Energy Market Updates

Today will prove to be a pivotal day as Diesel futures sit on the support line of $2.60. While we have shed nearly $.20 in the last two weeks, we still need to settle...

After testing the limits of the top half of the range on Monday, ULSD cooled off the last three days by about $.10 to fall into the comfort zone of the mid $2.60’s. The...

With the inventory report delayed due the Monday holiday, we were able to enjoy the recent correction in pricing for another day.  We are about $.11 cheaper today than a week ago and $.25 lower than two weeks ago, basically back to where we started at the beginning of the month.  Interesting to note that we are right around the same spot as we were a year ago this time.   It is almost as if the market has priced in the ongoing world tension and once again is looking at more fundamental sources of influence.  The last week was like the most aggressive in terms of shipping attacks, retaliation, and a war of words, yet futures overall are lower.   Additionally, we are coming up on the two year anniversary of the Russian invasion of Ukraine with little or no end in sight.   Traders instead are focused on FED rates and demand figures that still appear to be bearish in nature.

Futures are up and walking, rather running, the last week after being paralyzed by conflicts abroad. 

The run up in futures pricing since June sure seems like a mountain (see graph). As the song says, “It’s hard to move mountains when you’re paralyzed”. Distillates are...

At first glance of yesterday's inventory report you would assume that a solid up day was in the making.  As has been the case, the devil is in the details.  While all products showed modest drops, they were largely offset with massive exports, known refinery maintenance and switching to winter grade gas.  The largest market mover was the FED maintaining rates but signaling they expect possibly 2 more rate hikes in the coming months.  A large sell-off took hold pushing diesel futures down almost $.10 before settling down just under $.05.  The profit taking ideology is that if rates get higher, it dampens economic growth thus curbing overall fuel demand, add in that it makes it more expensive for foreign currency buyers of products. 

Depending on the News outlet you watch or read, you will hear two very different narratives.  The one where “prices rises as Idalia makes landfall”….. or “soft demand figures push futures lower.”  It really a tale of two products right now between gas and diesel. 

Fuel markets appeared to have shrugged off what could have been a historic week, should an actual Coup attempt in Russia transpired.  The current market mood appears to be focused more on actual supply and demand factors.  Crude inventories showed a massive 9m barrel loss this week while finished gas and diesel were relatively flat.  Gasoline futures soared yesterday taking ULSD  along for the ride, although not as much. 

After hitting yearly lows last week, Diesel pricing has risen over $.15 in the last week.  As expected, bargain hunters typically buy in regardless of fundamentals.  The increases have been muted somewhat as there is still that languishing fear that demand will fall off the proverbial shelf in the last two quarters. However, this weeks report showed that gasoline and diesel demand in the US remains somewhat strong, posting gains over last week and last year.  While both products showed draws in inventories this week, and Crude showed a solid increase, that appears to more of a factor of less refinery production than anything else.  Inventories for all appear stable with the exception of the SPR which is expected to begin repurchasing soon. 

Typically Inventory levels and price direction have an inverse relationship.  When Inventories rise, prices fall…. When Inventories fall, prices rise.  As one said, “this ain’t no typical market”.