At least we can find some solace in the fact that diesel pricing has fallen almost $.50 in the past week. Once again, we ride on the downside of the Deal or No Deal wave that has strangled the market.
Presently, it appears that Iran and US backed Oman are carving out shipping control over the Strait of Hormuz, allowing for Iranian controlled entry and Oman controlled exit. This is a major concession on part of the US, but may be the only face saving end to the conflict. As mentioned, the spike has caused massive increases for Refiners in distillate production profits, and even greater in export profit. Historically, these conditions are short lived for refineries and generally garner a fair amount of media attention in Quarterly profit reports. This week showed a staggering 21% increase in distillate exports which is starting to get concerning as we head into refinery maintenance season, heating season in New England, a steep monthly backwardation and the ever present hurricane season. Having a supplier with guaranteed wet barrel positions will prove wise in the coming months, a value that is often overlooked.