Energy Market Updates

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...

With the inventory report delayed due the Monday holiday, we were able to enjoy the recent correction in pricing for another day.  We are about $.11 cheaper today than a week ago and $.25 lower than two weeks ago, basically back to where we started at the beginning of the month.  Interesting to note that we are right around the same spot as we were a year ago this time.   It is almost as if the market has priced in the ongoing world tension and once again is looking at more fundamental sources of influence.  The last week was like the most aggressive in terms of shipping attacks, retaliation, and a war of words, yet futures overall are lower.   Additionally, we are coming up on the two year anniversary of the Russian invasion of Ukraine with little or no end in sight.   Traders instead are focused on FED rates and demand figures that still appear to be bearish in nature.

Coming off the Monday Holiday, prices surged higher Tuesday as OPEC+ heavyweights Russia and Saudi Arabia confirmed they would extend voluntary production cuts through the end of the year.  Fueling the rise from the Cpt. Obvious department, big banks publish reports to expect $107 Crude if cuts maintain.  Buy the rumor, sell the fact.  Diesel had a nice sell off going, but remember, one day doesn’t reverse the trend.  Wednesdays intraday action erased almost all of the gains only to settle down slightly.  While we still sit almost $1 higher in pricing than the beginning of the Summer, you would have to think better days are to come.  Current JUNE 24 Diesel future pricing is $.45 less than front month October 23. 

Fuel markets appeared to have shrugged off what could have been a historic week, should an actual Coup attempt in Russia transpired.  The current market mood appears to be focused more on actual supply and demand factors.  Crude inventories showed a massive 9m barrel loss this week while finished gas and diesel were relatively flat.  Gasoline futures soared yesterday taking ULSD  along for the ride, although not as much. 

On February 24, 2022 Russia invaded Ukraine thrusting oil markets into one of the most volatile periods in decades, reaching prices never seen before.  At just over a year later, the APR contract is just $.01 off of where we were when this all started.  (see close on 2.24.23 below and chart) .  The circumstances around the recent drop are obviously derived from the recent banking meltdown. 

We are now a year removed from Russia’s invasion of Ukraine, and like many times in the past, we seemed to have made it through an extremely volatile period.  Since the onset of this “new normal” we have stressed the need to have a strong relationship with your supplier to help navigate the ever changing landscape.  Recall that we said the $2.65 level for the ULSD contract is a key support level, we have now hit that four times and bounced off it (see below) and the market is truly searching for direction with a $.25 range the last few weeks. 

While it might be hard to think about cold weather with temperatures in the 60s across the region, keep in mind that all too often, we still have an arctic blast come through late February into March.  Staying the course with a winterized fuel is critical to a smooth operation this time of year. 

Even though Diesel futures have fallen roughly $.20 in the last two days, we are still almost $.40 higher than the beginning of the month.  Still optimistic that we will considerably lower in the coming weeks, however.  

Future pricing action continues to be as wild as a Patriots game ending, with the average swing intraday running over $.12 from high to low.  Yesterday’s bump higher in diesel was somewhat expected on the heels of three strong down days and a fair amount of market moving news on tap. 

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.