The volatility within the ULSD pit continues to keep everyone scrambling. $.20 swings from high to low have become the norm. That coupled the lack of product in the Northeast is putting real stress on not only suppliers but customers alike. As we mentioned a few days ago, refiners are stocking up on crude and producing as much distillates as they can. Evident in yesterdays Inventory report that showed Crude surge 8.5mbls and distillate output up over 160,000 bpd. While diesel inventories still remain low, down almost 1mbls, the demand numbers, down almost 200bpd are pointing to sure fire demand destruction.
Again, the timing of when that downward drop may take hold is tough to tell. Judging by the chart below, we may already be at the beginning stages of it. The backwardation of roughly .20 JUNE to JULY is still keeping many from bringing in any inventory which is keeping cash prices high. Those differentials, at historic highs, really have only one way to go I would like to think.
Most of us are hoping to wake up to pit that is down $.50 but it seems that the market is always able to find something to erase the losses. Today is a perfect example. ULSD was down almost .20 earlier and found a way to get almost .04 higher during the session. As I type it is down roughly $.04. Inflationary risk buying appears to be the driver, which I would have though that we would have seen less of as last month’s squeeze that sent shockwaves through the market with lingering effects.
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