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With Friday and Mondays' sessions cutting into the recent losses on ULSD by about $.35, it’s important to keep in mind the trend is still your friend. With early morning action seeing ULSD down $.08, we are still down over $.80 in the last few weeks.
In just over two weeks time, front month ULSD is down $1.00, with over $.50 coming in the last two sessions alone.
Over the last 2 weeks front month ULSD has risen almost $.80 in futures trading, but it looks like the driver of the run up maybe that crazy cousin RBOB. Gasoline typically rises this time of year but many thought this year would be different. Sky high retail prices and massive inflation concerns were thought to put a dent on demand. However, this weeks inventory report showed a surprise draw in gasoline stocks and strong demand numbers. It may be a holiday weekend anomaly, but Americans appear to be taking it all in stride, thus giving buyers no reason not to keep buying.
Diesel prices remain the talk of the table as they have shed over $1.00 in the last 15 days. Spot cash prices which at one point in early May were $1.25 over futures have since retraced to be roughly $.20 over. Still, by way of comparison, high to the first quarter of the year where they were pegged mostly flat to the screen. (see below).
There is a fair amount of news on the lack of diesel available in the northeast, and it is actually true. Last week’s DOE report showed that PADD 1 (East Coast) had 95mbls of diesel, that is down from 123mbls last year and 142mbls from 2 years ago.
The question is why?
The volatility within the ULSD pit continues to keep everyone scrambling. $.20 swings from high to low have become the norm. That coupled the lack of product in the Northeast is putting real stress on not only suppliers but customers alike. As we mentioned a few days ago, refiners are stocking up on crude and producing as much distillates as they can. Evident in yesterdays Inventory report that showed Crude surge 8.5mbls and distillate output up over 160,000 bpd. While diesel inventories still remain low, down almost 1mbls, the demand numbers, down almost 200bpd are pointing to sure fire demand destruction.
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.
Unfortunately you are all reading your nightly pricing correctly. As seen below, ULSD prices have risen almost a full $1 in the last four sessions.
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.