Energy Market Updates

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World Tensions & Workforce Worries

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.

Locally, real concerns about adequate workforce for the forthcoming Spring and Summer is a common theme amongst folks I talk with. Lean and mean is the approach that most have come to accept as the shortage for many is here to stay. DKB is very fortunate to have a full staff of Dispatchers, Drivers, Customer Service and Sales that is dedicated to providing you the service that you have come to expect.  This is a 24x7x365 business, and we pride ourselves in being here for you when you need it most.  While some take a break or breathe a sigh of relief that the winter has come, and almost left, without any major disruptions, we are already looking ahead to when the grass turns green.  No rest for the weary!

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Crude Inventory Build Overshadows Finished Product Decline

The large Crude inventory build yesterday overshadowed the decline in finished products and took the floor out of pricing yesterday.  Crude increased over 12 million barrels, largely due to the limited refinery activity in the past weeks.  Refineries are running at about 80% capacity due to maintenance, cold, and limited demand forecasts.  Fundamentals have pushed aside the risk premium in the last few days.  The Global conflict premium had shot diesel pricing up almost $.40 since the first of the year.  With distillate demand down about 10% compared to the same time last year, it makes refiners walk a tightrope on producing even with margins very high on distillates, in the $41 per barrel range currently.

As we all look towards not seeing anymore snow, Taylor Swift at football games, and cold temps, its important to know we are not done yet.  The next two weeks are often times when we get that arctic blast over a weekend making for a difficult Monday if you moved to a standard diesel too early.  Stay the course with your winterizing, DKB continues to stock and deliver winterized diesels.   Look for pricing to find its way back down over the next few weeks in much the same pattern we saw from September to January and hopefully we fall back another $.25 from here.

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Insights & Integrity: Rising Tensions & Refinery Challenges

Honesty and Integrity in all Dealings is not just a tag line for Dennis K. Burke, Inc, it is one of our Core Values as an Organization.  In a world that has become more and more competitive and polarizing, it is good to know that a true business relationships can still exist.  We strive to be transparent to our many Customers and non-Customer alike.  One of my weekly calls is from someone who is not even a Customer, but he is just simply looking for a new perspective or answer on a problem.    Which ties into another Core Value, a Commitment to Customer Service Excellence.  In my mind, a Customer is not defined as someone with an open account at DKB, it is more of anyone that I can assist or help out, in this often times crazy business.  (many of you have received a note from me with an introduction to someone who you can help out) Partly the reason for these updates is letting you know what is happening, insight in to what may be coming, and keeping an open line of communication.

At this time last week we thought we had a nice correction going on with diesel futures.  However, with rising tensions abroad, we are right back to where we were a week ago.  It is getting increasingly difficult to even sort out the players in the Middle East conflict, which has added to the overall risk premium in the fuel market.  At home, a cold snap and torrential rains has limited refiners operating capacity of late, they are down about 5% from last year.  This was evident in the inventory report that showed increases in Crude and decreases in finished products.  Total gas and diesel demand is still about 1.5% lower than last year at this time.  Look to be stuck in this range for the next week or two as refiners come back on line and demand starts to pick up.

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Cruising Through Choppy Waters: Market Swings & Red Sea Tensions

Futures markets continue to trade in wide daily ranges as it digests both inventory and demand data along with monitoring the ongoing “crisis” in the red sea area.  While diesel futures are up over $.20 from the beginning of the month, it appears it could have been a lot worse without taking into account the overall lack of demand.  Both gasoline and diesel inventories are up over last year, +9% on gas and +18% on distillates, the demand figures are what we are watching closely.  Both products are down roughly 3% versus last year, while it doesn’t seem like a large number, in the overall picture it is enough to keep markets in check from skyrocketing higher.  Again, diesel demand is often looked at a measuring stick of the overall health of the economy.  Clashes in the Red Sea shipping lanes appear to be lessening, but still ongoing, keeping many on edge.  It looks like the markets react overnight with news of new attacks, then subside as the day goes on. 

The daily price swings appear to be in play for a while until more concrete sentiment takes hold.  Having the “right size” fueling operation for your business is critical to normalizing your spend and operational involvement.  For those long term job sites or even additional onsite storage, DKB has tanks for rent or for sale, that can be fully remotely monitored.  Less deliveries, less interruptions, less paperwork all helps in saving you time and money while allowing you to concentrate on running your business versus worrying about fuel. 

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Navigating Stability Amidst Global Tensions & Winter Dynamics

The trend to lower lows every 15 days or so appears to have subsided.  Does this mean the market has found a comfort level for the next few weeks?  My sense is that most are still weighing the Global Demand vs Mid East Risk Premium battle that we mentioned last week.  Global tensions continue to be elevated as Houthis strikes have reached vessels in the Red Sea, Pakistan has now struck Iranian targets and the war of words between all nations ramps ups.  The strike first, speak later motto is what has most on edge.  With Inventories set to be released this morning, a day later due to the Holiday, a careful eye will be not just on stocks, but demand, specifically in the distillate sector.   While the middle of the Country saw a cold snap  last week, here in the Northeast we are starting to get towards more seasonable temperatures.  Again, stay the course with Diesel Winterization programs. 

Sideways market movements are often the most difficult to deal with.   While they do bring some stability to overall costs, the day to day gyrations can leave us scratching our heads.  It is important to be in close contact with your supplier and Rep to be aware of what happens throughout the day.  More so in the winter as sometimes future market movements do not translate to local physical markets. Schedule a Meeting

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Post-Holiday Recap: Navigating Global Sentiments, Mid East Tensions, & Winter Fuel Strategies

With the Holidays behind us, we would expect that we see more rational trading on the futures markets.  As mentioned, the last two weeks saw big swings due to low volume.  Still, futures appear to be stuck in this tug of war between what appears to be an overall sentiment of Bearish global demand versus the Risk Premium of Mid East aggression.   Strong increases three times in the last week are largely attributed to Houthis attacks on shipping lanes in the Red Sea.  Tuesdays increases came with reports of 21 drone and missile attacks, however it is to note that none of the launches reached a target, as all were neutralized well before any harm was done.  Still, the possibility exists.  Closer to home, inventories of finished product keep rising.  Gasoline rose over 19mbls in the last 2 weeks even with demand up 10% over last year.  Diesel is somewhat of a different story as inventories have increase for seven straight weeks, and sits about 12% more than last year, demand however, is down just over 10% from last year.  Trucking tonnage amounts to about ¾ of all US freight, and is “not expected to improve in the near future”. This has a significant impact on diesel demand and is often a barometer of the economy as a whole.  This may be a underlying reason for more downward pressure on the ULSD futures. 

We are in the midst of the New England winter and while it may cross your mind as to why you are buying winter fuel with it 40 degrees, I urge you to stay the course.  Temperatures can and do shift dramatically from week to week, the last thing you want is to get caught without any protection.  Reminder that there are still some Q2 and Q3 values out there if you are looking at solidifying your fuel costs, as always, we are open to discussing your needs at any time.

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Yuletide Ups & Downs: Unwrapping the Red Sea Ripples

It’s hard to stay in the Holiday Spirit with 5 out of the last 6 days being up days.  We now sit about $.20 higher than a week ago.  But if you believe in the trend that we have been in for the last four months, there won't be a lump of coal in your stocking in another week.  Rather, it would suggest that we will reach a new low. 

The recent rise can be solely attributed to the Houthis activity in the Red Sea.  A Yemen backed group that has been attacking both cargo and fuel ships in an area where about 10% of the world goods pass through.  This has lead to most majors “temporarily halting or rerouting” vessels away from the area.  Yesterdays gains were reversed with the Inventory report showing an increase in Distillate stocks and demand still about 5% less than last year.  Adding to that was the trucking index report, resuming its downward trend after a one month pause in October.  Don’t Ba Humbug yourself if you think you missed the chance to secure Q1 or Q2 gallons, have a number in mind what works best for yourself now, and when it approaches, execute.  Again, the long term trend still appears lower.  Stay in close contact with your Rep as the market moves quickly.  As we head into the last week of the year, from all of us here at Dennis K. Burke, Inc. we first say THANK YOU and wish you and your families a Safe and Happy Holiday Season!

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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. 

Futures took a dive on Monday, with ULSD falling almost $.10 as concerns over the long term demand figures keep resurfacing like that annoying toy your got your kid for Christmas.  However, the market has a short memory and the news that the FED maintained rates and hinted at cutting rates next meeting provided a boost with futures having almost erased Mondays losses.  I would expect to see pricing stay within this range over the last few weeks of the year as it tends to be a heavy vacation time and traders settle up year end positions.  Diesel and gasoline inventories saw slight increase last week and demand was flat to slightly higher for both, giving support to an already charged index.  As many of us have already seen the first snow fall, please keep those fills and stairs free of snow and ice as you are never the last stop!

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Winter Diesel: Understanding Cloud Point, CFPP, & Pour Point

The long term fuel price trend continues to head lower with diesel pricing being almost $.20 lower than a week ago.  There is something in the orange that tells me we are not done. 

Recall, we don’t hit new highs and we touch new lows.  Inventories showed moderate increases for both gasoline and diesel, with demand showing its first increase in weeks.  Some demand uptick can be attributed to the start of the heating season.  That also means the start of winterized diesel fuel.  Not all diesel is the same and it is important to understand the language around winterization to keep your fleet running smoothly.  There are three key terms in talking winter diesel.  Cloud point, CFPP, and pour point.  Cloud Point is the most stringent and conservative temperature at which fuel will initially start to freeze by showing a haze or “cloud” of the wax crystals starting to drop out of the fuel.  Standard diesel has a cloud point of +15 degrees F.  CFPP or (Cold Filter Plugging Point) is the temperature at which the diesel will stop passing through a standard filter.  Additives, which have gained effectiveness over the years, can change the molecular structure of the wax molecules to prevent them from sticking together and allow them to pass through filters.  This temperature is usually significantly lower than a cloud point.  Pour Point, is the temperature when diesel loses its ability to flow.  At this point you aren’t moving.  This temp is often much lower than the CFPP.  So its important to know that if someone says the fuel is a -22F diesel, asking if that is Cloud, CFFP or Pour Point is important.  Securing Q2 pricing has gained some momentum with this recent dip, we are always willing to discuss your specific needs. Schedule a Meeting

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