Energy Market Updates

Special Friday edition! Last week we said fuels were at a pivotal stage and could see some downside. Well, like the Weatherman, it was 50-50 shot. In diesels, we are...

Today will prove to be a pivotal day as Diesel futures sit on the support line of $2.60. While we have shed nearly $.20 in the last two weeks, we still need to settle...

After testing the limits of the top half of the range on Monday, ULSD cooled off the last three days by about $.10 to fall into the comfort zone of the mid $2.60’s. The...

Sideways is the best way to describe the 20 days in the fuel market. Diesel pricing has been stuck in a $.10 range, unable to break below the $2.60 support level....

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.

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. 

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). 

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.  

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.