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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.
Future pricing action continues to be as wild as a Patriots game ending, with the average swing intraday running over $.12 from high to low. Yesterday’s bump higher in diesel was somewhat expected on the heels of three strong down days and a fair amount of market moving news on tap.
The Market giveth and the Market taketh.
After falling over $.50 last week, front month ULSD has risen almost $.50 this week. Gains were primarily on the heels of the Keystone pipeline leak that spewed 14,000 bbls (588,000g) of crude into Northeast Kansas late last week, prompting Operator TC Energy to shut down the entire pipeline. Main note on why this is significant, is that this leg of the pipeline runs to Cushing, Oklahoma which is the primary metric for weekly Inventories. As of this morning, product has since started to flow but still not through the damaged section which may take weeks to repair.
A few weeks ago we hoped to see ULSD trading $.50 lower, as the cash market was tumbling at warp speed. And would you look at that, here we are! Much of those losses have come from the last 5 sessions alone. (see chart below).
Hope’s not a four letter word, although, probably not the best strategy in the fuel business.