Energy Market Updates

Posts by:

Mark Pszeniczny

Demand Surge & Global Impacts

A massive increase in demand for gas and diesel stalled the downward correction we have been seeing as of late.  Adding to that, both finished products inventories fell last week, diesel futures took the lead and jumped up more than $.05 yesterday.  While we seem to be set for an early spring and hopefully a more robust construction season, the 15% increase in distillate demand has many scratching their heads.  Even with the latest increase, the 4 week average for demand on distillates is still relatively flat.  Gasoline average demand is still down about 3%, even after last weeks 6.4% increase.  Buoying pricing was also the first reported fatalities onboard a Commercial Vessel from Houti attacks in the Red Sea area.  A major global shipping lane, this latest attack will likely all but halt most vessels from entering the area.  The FED is in a holding pattern on rates, but have hinted that they will make “appropriate” adjustments in the coming months as inflation appears to be stalling, how that influences fuel pricing remains to be seen.  I would expect pricing to continue this sideways action and be somewhat range bound for the next week or so.

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World Tensions & Workforce Worries

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.

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Crude Inventory Build Overshadows Finished Product Decline

The large Crude inventory build yesterday overshadowed the decline in finished products and took the floor out of pricing yesterday.  Crude increased over 12 million barrels, largely due to the limited refinery activity in the past weeks.  Refineries are running at about 80% capacity due to maintenance, cold, and limited demand forecasts.  Fundamentals have pushed aside the risk premium in the last few days.  The Global conflict premium had shot diesel pricing up almost $.40 since the first of the year.  With distillate demand down about 10% compared to the same time last year, it makes refiners walk a tightrope on producing even with margins very high on distillates, in the $41 per barrel range currently.

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Insights & Integrity: Rising Tensions & Refinery Challenges

Honesty and Integrity in all Dealings is not just a tag line for Dennis K. Burke, Inc, it is one of our Core Values as an Organization.  In a world that has become more and more competitive and polarizing, it is good to know that a true business relationships can still exist.  We strive to be transparent to our many Customers and non-Customer alike.  One of my weekly calls is from someone who is not even a Customer, but he is just simply looking for a new perspective or answer on a problem.    Which ties into another Core Value, a Commitment to Customer Service Excellence.  In my mind, a Customer is not defined as someone with an open account at DKB, it is more of anyone that I can assist or help out, in this often times crazy business.  (many of you have received a note from me with an introduction to someone who you can help out) Partly the reason for these updates is letting you know what is happening, insight in to what may be coming, and keeping an open line of communication.

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Cruising Through Choppy Waters: Market Swings & Red Sea Tensions

Futures markets continue to trade in wide daily ranges as it digests both inventory and demand data along with monitoring the ongoing “crisis” in the red sea area.  While diesel futures are up over $.20 from the beginning of the month, it appears it could have been a lot worse without taking into account the overall lack of demand.  Both gasoline and diesel inventories are up over last year, +9% on gas and +18% on distillates, the demand figures are what we are watching closely.  Both products are down roughly 3% versus last year, while it doesn’t seem like a large number, in the overall picture it is enough to keep markets in check from skyrocketing higher.  Again, diesel demand is often looked at a measuring stick of the overall health of the economy.  Clashes in the Red Sea shipping lanes appear to be lessening, but still ongoing, keeping many on edge.  It looks like the markets react overnight with news of new attacks, then subside as the day goes on. 

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Navigating Stability Amidst Global Tensions & Winter Dynamics

The trend to lower lows every 15 days or so appears to have subsided.  Does this mean the market has found a comfort level for the next few weeks?  My sense is that most are still weighing the Global Demand vs Mid East Risk Premium battle that we mentioned last week.  Global tensions continue to be elevated as Houthis strikes have reached vessels in the Red Sea, Pakistan has now struck Iranian targets and the war of words between all nations ramps ups.  The strike first, speak later motto is what has most on edge.  With Inventories set to be released this morning, a day later due to the Holiday, a careful eye will be not just on stocks, but demand, specifically in the distillate sector.   While the middle of the Country saw a cold snap  last week, here in the Northeast we are starting to get towards more seasonable temperatures.  Again, stay the course with Diesel Winterization programs. 

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Post-Holiday Recap: Navigating Global Sentiments, Mid East Tensions, & Winter Fuel Strategies

With the Holidays behind us, we would expect that we see more rational trading on the futures markets.  As mentioned, the last two weeks saw big swings due to low volume.  Still, futures appear to be stuck in this tug of war between what appears to be an overall sentiment of Bearish global demand versus the Risk Premium of Mid East aggression.   Strong increases three times in the last week are largely attributed to Houthis attacks on shipping lanes in the Red Sea.  Tuesdays increases came with reports of 21 drone and missile attacks, however it is to note that none of the launches reached a target, as all were neutralized well before any harm was done.  Still, the possibility exists.  Closer to home, inventories of finished product keep rising.  Gasoline rose over 19mbls in the last 2 weeks even with demand up 10% over last year.  Diesel is somewhat of a different story as inventories have increase for seven straight weeks, and sits about 12% more than last year, demand however, is down just over 10% from last year.  Trucking tonnage amounts to about ¾ of all US freight, and is “not expected to improve in the near future”. This has a significant impact on diesel demand and is often a barometer of the economy as a whole.  This may be a underlying reason for more downward pressure on the ULSD futures. 

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