Energy Market Updates

Another wild day yesterday, and this week, as diesel futures traded in a $.10 range the last two days.  There is something to be said that when you walk into a meeting the market is up $.01 and when you walk out it is down $.08! As the December screen falls off and we look at January, the overall movement still appears to be to the downside.  Again, highs not getting higher and lows getting lower over time.  Inventories showed increases across the board this week with distillates leading the charge with a huge 5.2 million barrel jump.  Demand figures showed drops in both gas and distillates and again diesel down almost 18% compared to last year.  (Although, you wouldn’t know it judging by the endless Fed Ex and Amazon trucks showing up at my door). 

Keeping pricing elevated has been nervousness around what will come out of todays OPEC+ meeting.  Saudi Arabia has been pushing others for more cuts to support pricing as it appears to be tired of doing it alone.  Other members are not too sure if the timing is right at this point.  As you tear your World Famous Dennis K. Burke Calendar to the last page, it’s a stark reminder that winter is here.  Proper winterization of diesel is vital to keeping your fleet running.  We pride ourselves in being specialists in this area and are always willing to lend a voice for your area and what products are available.  We have seen relatively mild temps the last few winters but that doesn’t mean we should be lackadaisical about what’s ahead.  DKB is well supplied with all products to make sure your fleet is operational all season. If you'd like to set up a call or meeting to discuss what makes sense for your company, schedule the best time for you here: Schedule a Meeting

A very different picture is painted this week after an almost $.18 drop in Diesel Futures posted yesterday, and another $.07 off presently this morning.  Prior to this, it appeared as though we were on a slow progression downward but instead the proverbial bubble burst.  Call it profit taking or a change in sentiment, it is clear that this correction is needed.  Should another heavy down day remain, we could be in for a return of pricing not seen since early May, which is about $.80 lower.  

The market should have seen some support yesterday with OPEC+ announcing they would maintain self-imposed production cuts through the end of November, however the market got an early Halloween scare with demand figures in this weeks Inventory report.  After promoting the narrative of tight supplies for months, most could not look past gasoline demand dropping 7% last week and down a whopping 15% to last year.  Distillates (all diesels) was down 4% last week and over 7% from a year ago.  Buy the rumor, sell the fact.  Diesel futures are down $.30 in the last four sessions and almost $.40 since mid September. 

A very important notion to understand is the persistent backwardation that is staying around longer than your in-laws.  November USLD is priced almost $.15 higher than January.   If it holds, this will prevent suppliers from bringing in excess or uncontracted gallons to the terminals.  In other words, their asset or investment (product), depreciates in value rather than gaining value over time.    As the closer months drop significantly, the outer months typically do not drop as much therefore leveling out the futures strip over time.  So there is some value to look at future pricing even with the high November screen. 

Again, always willing to have a call, in person or virtual meeting, to discuss your specific needs.  In this environment, you can never know too much. Schedule a Call

At first glance of yesterday's inventory report you would assume that a solid up day was in the making.  As has been the case, the devil is in the details.  While all products showed modest drops, they were largely offset with massive exports, known refinery maintenance and switching to winter grade gas.  The largest market mover was the FED maintaining rates but signaling they expect possibly 2 more rate hikes in the coming months.  A large sell-off took hold pushing diesel futures down almost $.10 before settling down just under $.05.  The profit taking ideology is that if rates get higher, it dampens economic growth thus curbing overall fuel demand, add in that it makes it more expensive for foreign currency buyers of products. 

Additionally, truck tonnage was down 2.3% in August, marking the sixth straight month of year over year declines.  Many point to last year being a shipping anomaly coming out of COVID, but it is still hard not to take into account the declines.  Even though we are seeing a rebound today, expect a choppy downward progression as we close in on the winter months.  Speaking of winter….. It’s not too early to start thinking about winter product and the associated costs.  Availability of Kero as a blending component appears to be a concern for many.  Feel free to reach out to discuss how we can assist and also talk about pricing next year's needs. Schedule a Meeting