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Futures Soar

ULSD Continues to Skyrocket on Short Squeeze

Unfortunately you are all reading your nightly pricing correctly.  As seen below, ULSD prices have risen almost a full $1 in the last four sessions. 

2022-04-28_12-40-27

As I mentioned earlier in the week, it is likely due to a short squeeze versus anything fundamentally related to the Oil Markets.  Although there are some pointing to distillate stocks being at their lowest level in 14 years as a driver, it appears that is being over played because demand for ULSD has fallen for the fifth week in a row. 

Front month MAY ULSD (which falls off the board Friday) is a full $1 higher than JUNE trading presently at $4.9950.  It is $1.50 higher than front moth NL @ $3.5250.  Its important to note the disconnect to Crude which is “only” at $103 and change.  For those of you that remember July of 2008, when Crude was at an all time high of $147, Diesel was trading just above $4.00.  All the more evidence to point towards a squeeze versus fundamental factors. 

The problem is, how long does this last?   Looking at the strip above, the backwardation is still healthy out through December, not as pronounced but still present. 

I would like to say that we are past this after Friday, but my feeling is the rocket ship-feather theory will hold true. 

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NYMEX sways with data and storm

A slew of data today had Futures up strong for much of the day while gasoline danced around the flat area as it decided how to digest all the news.  First and foremost, any hurricane premium added to the market kept prices lower as Irene appears to be slicing it's way towards New England.  Good for the Oil industry, not so good for our neck of the woods.  Landfall is now expected to be Sunday night or Monday morning with potential of a CAT 3 hurricane.  Inventories released today where also actually slightly bearish as compared to API's last night.  The Crude draw of 2.2 mbls was substantially less than the 5 mbl draw reported last night.  Gasoline and distillates also added 1.7mbl and 1.4mbl respectively.  As reports of Junes durable goods orders being a modest 4% increase hit the wires, a fresh round of buying hit the pits as this is a good sign of an improving economy, but muting that news was a weakening housing report that showed values dropping yet again.  All eyes will now be on Friday as the FED is expected to speak again.  At the close, Crude actually lost .28 to $85.16 while RBOB added a mere .0018 to $2.8784 and HEAT gained .0182 to $2.9607.
heat map
RBOB CLOSE
                 CLOSE       CHANGE 
  
SEP    27884       +.0018
OCT    27558     +.0086
NOV    27118     +.0113
DEC   26902       +.0121
JAN    26907       +.0129
FEB    27008      +.0133
HEAT CLOSE
          CLOSE    CHANGE
SEP    29607    +.0182
OCT   29690     +.0198
NOV    29761      +.0202
DEC   29825     +.0207
JAN   29901       +.0216
FEB   29876       +.0218
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Nymex Futures close strong with optimism

It appears that the last four sessions have completely erased the pessimistic view, or fear of the Sachs case that saw HEAT correct almost 10 cents in two days. We have now come all the way back to where we were on Thursday of last week. The quick correction had Bears beating their drums that $2 heat was on the horizon, and admittedly so, I was listening. The ability for the market to gain back what was lost on :

1. Very weak fundamentals (lots of supply…low demand)

2. Thousands of flights in Europe grounded (more demand loss)

3. Goldman Sachs investigation (more guys to fall)

Has to have one thinking …. “this thing has a mind of it’s own”. It does. The notion that we are on an economic upswing has participants rolling the dice that the US economy still has room to improve. At the close, Crude added $1.37 to $85.08, RBOB jumped higher in the last 30 minutes of the session adding .0529 to $2.3531 and HEAT gained .0355 to $2.2505. It’s like déjà vu all over again as we head into another weekend searching for direction and reason.

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