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There is no sauce that can make crow taste good. I’ve been holding to the mindset that Diesel futures market should correct to the mid $2.30s for about a month now. We have risen over $.50 in that time with every day for the last two weeks being up. Well, I am going on “the bound to win” theory and sticking with it!
It has been a tough start for many this summer, the heavy rains throughout the region have delayed projects, hindered marina activity, and limited travel in general. New Englanders, like the market, are resilient. We always find a way to bounce back, move forward and DKB will be right there with you.
Oil markets moved higher this week primarily on the “surprise” production cut announced Sunday evening. Recall two weeks ago we cautioned “ All eyes will be on the FED and what they announce in the next meeting, more rate hikes or not? Also look to see if OPEC+ decides to cut production to bolster prices in the coming weeks.”
A surprise increase in Distillate inventories fueled a sell off across all pits yesterday. Distillates grew by 300k barrels while most expected a decline of about 1.5m. This, coupled with surprisingly low demand numbers (down almost 7%) saw the pit erase the roughly $.15 in gains added in the last two weeks. It appears that we are continuing that slow progression downwards with mindless swings in between.
A few weeks ago we hoped to see ULSD trading $.50 lower, as the cash market was tumbling at warp speed. And would you look at that, here we are! Much of those losses have come from the last 5 sessions alone. (see chart below).
The past two weeks has seen ULSD rise, and subsequently fall almost $.20 on the front month. Much of the dip in the last few days came as market players were able to digest some of the details in the 785 page Inflation Reduction Act which appears to moving its way through. One piece which many believe will have the most impact on futures is that the bill revives lease sales canceled or delayed by President Biden including: one in Alaska’s Cook Inlet and three in the Gulf of Mexico. This section also appears to require the Biden Administration to adopt Trump era directives for 2022 oil and gas leasing established.
The other day I mentioned how the futures markets rose, yet the cash markets fell. Yesterday was the reverse for some. While ULSD futures closed down $.1557 to $4.0413, ARGUS cash trading edged up .0193. We are obviously in the most volatile period I have seen in all my years.
On Tuesday morning we were feeling pretty good, relatively speaking, as the ULSD pit was almost .40 less than a week ago. Demand concerns over China’s lockdown and slowing production rates put pressure on an already inflated market.
Oil prices surged another 7% today. At peak intraday highs, WTI hit $105.14/bbl before settling at $103.41.
Oil prices are continuing to slide back down some after multiyear highs last week. (At time of writing at 10 this morning, both refined products are trending down)