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.
We are in the midst of the New England winter and while it may cross your mind as to why you are buying winter fuel with it 40 degrees, I urge you to stay the course. Temperatures can and do shift dramatically from week to week, the last thing you want is to get caught without any protection. Reminder that there are still some Q2 and Q3 values out there if you are looking at solidifying your fuel costs, as always, we are open to discussing your needs at any time.