Energy Market Updates

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Kerosene

The Importance of Kerosene in Winterization

In a follow up from last week, I was asked by a bunch of people on an item I forgot to mention in winterization.  Kerosene.  Kero is a key component in winterizing diesel fuel as its cloud point is about -6F, significantly lower than standard diesel.  We use kero and diesel blends as a form of winterization throughout the region.  In recent years, the cost of kero has risen dramatically for a variety of factors such as lack of supply, over bought by airlines and it being a seasonal niche product in a backwards futures market.  DKB has supply and the ability to continue to provide these blends, no need to worry. 

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The Market Giveth and the Market Taketh - Winter is Coming

We had a nice $.10 pullback going from Friday to Tuesday, but the market giveth and the market taketh. After another 2.2-million-barrel draw in crude inventories posted this week, the entire complex moved higher even with gas and diesel showing slight increases.  Furthermore, product demand showed down again year over year by about 5%.  A fair amount of talk and politicizing of a looming Government shutdown will have on financial markets and heavily regulated industries like air travel.  All providing support to pricing.  Still, it looks as though we may have topped out in the last few weeks as we move into the winter season. 
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Why the Surprise Down Day? The Devil is in the Details

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. 

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ULSD - Downside Potential Stalls on KS Spill

The Market giveth and the Market taketh. 

After falling over $.50 last week, front month ULSD has risen almost $.50 this week.  Gains were primarily on the heels of the Keystone pipeline leak that spewed 14,000 bbls (588,000g) of crude into Northeast Kansas late last week, prompting Operator TC Energy to shut down the entire pipeline.  Main note on why this is significant, is that this leg of the pipeline runs to Cushing, Oklahoma which is the primary metric for weekly Inventories.  As of this morning, product has since started to flow but still not through the damaged section which may take weeks to repair. 

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