Energy Market Updates

After a brief cease fire between the US and Iran early this week, hostilities resumed pushing oil markets to fresh highs. Finished diesel and gasoline are now close to levels we saw in early March when the war started. What is interesting to point out, at these levels, one would think crude oil to be $125-$135 per barrel, but that’s not the case, it’s $85. A factor of US sourced product, making the ULSD crack spread (value of a gallon of crude compared to the value of a gallon of diesel) at over $90 per barrel, compared to roughly $55 to make gasoline. That will and has pushed refiners to produce more distillates recently, which are starting to show in weekly inventory numbers. How that tames finished pricing down the road still remains to be seen. Theory being, more inventory, lower demand, lower pricing. The caveat may be the steep backwardation from one month to the next preventing some from carrying inventory. While it may feel like your swimming on Cape Cod with a pack of seals, (love shark week) knowing your supplier is in your corner can be the lifejacket you need.

 As military action dominates headlines the last week, diesel futures have soared roughly $.80 to new highs even as demand figures for the product are down roughly 7%...

 It was just 10 days ago we were feeling pretty good to seeing sub $3 diesel pricing. This morning I feel like Kevin Bacon’s character in the final scene of Animal House...

 It’s turned into a sit and wait game for much of the fuel markets the last week. Waiting for direct negotiations between the US and Iran on a formal peace deal. The US...

 As the ebb and flow of ship traffic in the Middle East returns to pre conflict levels, traders have cut roughly half the increase in futures pricing. Shipping rates...

 Deal signed, now what. Actually it’s a “memorandum of understanding”. Can you imagine the password on that Docusign email! A lot still has to fall into place before we...

 In a world of post first, verify later, it has become increasingly more difficult to put any sort of rational into market movements. One would expect today to see...

 Well, that escalated quickly. On Friday afternoon tweets of lifting a blockade and free flowing ships had futures continuing their downward spiral. But a few hours...

You would think that a $.60 price drop in the last week would have us excited, but this is now roughly the fourth time we have retreated from a record high on peace news. Although what is interesting is that this most recent drop has come over 5 sessions, over a holiday week, and not a massive drop off a soundbite. To add, it doesn’t appear that any concrete plans have emerged and fighting within the Iranian delegation may prolong any lasting truce. On the bright side, ship traffic through the Strait is roughly 43% of normal, seeing about 25 vessel pass in the last 24 hours. My aluminum hat wearing side thinks this is likely what the US wants. Let Iran self-destruct and quietly return to normal. This coming from a guy who still can’t figure out how to hang up a call on an iPhone.

Recall last summer when the news cycles were reporting the US had “less than 30 days supply of diesel”! Well, expect to hear that again soon as finished diesel inventories now sit at roughly 26 days of supply, where the unofficial warning level is about 30 days. Reality check… that is if everything stopped today, we would have 26 days…. truth is refineries are running at 90% capacity with the vast majority of finished and unfinished products being exported.