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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.
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).
Volatility continues to have a hold on the diesel market. In the past week alone, we have dropped over $.30 and subsequently rose $.30 in just four sessions.
In the last 6 sessions we have seen ULSD futures slide just over $.50 in value. While this is good news, the previous 6 sessions added just about the same amount. So basically we are back to the same levels we were mid-August where we all felt pretty positive pricing was moving in the right direction. Much of the rise can be attributed to money being put into the market as an inflation hedge as rates continue to rise, though it is tough to keep that money in long term with the ever present backwardation.
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.
The last three sessions have seen .4373 get peeled off the ULSD front month contract, with massive intraday swings. Yesterday at the open, APR22 ULSD fell almost .25 before rallying back to finish down only .0673.
March came in like a lion, lets hope it goes out like a lamb…..