Energy Market Updates

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ulsd (2)

Israel vs Iran Price Jumps Fail to Materialize

If you were one of the ones I spoke with Sunday evening after news of Irans strike on Israel, you knew I was all in that we were headed for new highs.  In what turned out to be a Nothingburger without any Mac Sauce, Israel and their allies basically played space invaders on Iranian drones and missiles.  US aircraft were said to have neutralized over 30% of the weapons alone.  It will be interesting to see how Irans street cred is affected going forward, as we sit now, the market is unwinding a healthy chunk of the threat premium that’s been added in recent months.  ULSD futures now sit below the much talked about support level of $2.60.    

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Demand Surge & Global Impacts

A massive increase in demand for gas and diesel stalled the downward correction we have been seeing as of late.  Adding to that, both finished products inventories fell last week, diesel futures took the lead and jumped up more than $.05 yesterday.  While we seem to be set for an early spring and hopefully a more robust construction season, the 15% increase in distillate demand has many scratching their heads.  Even with the latest increase, the 4 week average for demand on distillates is still relatively flat.  Gasoline average demand is still down about 3%, even after last weeks 6.4% increase.  Buoying pricing was also the first reported fatalities onboard a Commercial Vessel from Houti attacks in the Red Sea area.  A major global shipping lane, this latest attack will likely all but halt most vessels from entering the area.  The FED is in a holding pattern on rates, but have hinted that they will make “appropriate” adjustments in the coming months as inflation appears to be stalling, how that influences fuel pricing remains to be seen.  I would expect pricing to continue this sideways action and be somewhat range bound for the next week or so.

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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.

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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.

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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.

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