ULSD Trading Range Tightens Up
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.
A week ago we mentioned that when ULSD futures touched the 2.65 level we would likely see the market “re-evaluate” where we will go. It has done exactly that, by trading in a modern day “tight” range of $.11 in the last several sessions. A large crude build last week of 16.3 mbls put levels at almost a 2 year high, increases in gasoline and a slight 1.3mbl loss in distillates are putting downward pressure on the entire market. Strong retail sales, growing jobs, and increasing wage data is keeping inflation risk high. This will likely cause another slight increase in rates by the FED, thus pushing commodities higher.
One has to wonder if the increase in manufacturing and retail sales is more catch-up demand, as supply chain bottlenecks appear to be loosening. Either way, we are walking that fine line, and the market will take some time to reassess. This means it could be unlikely that we see large swings higher or lower for a period. Again, demand on a world level will have a strong pull with pricing as Russia appears to be maneuvering around the price caps, selling product to the easiest outlet. News is that new “component” export sanctions are being drafted that will limit raw materials from being shipped into Russia preventing them from build items like computers, machinery and weapons.
Its been a slow retreat to “normal” levels and while I would like to think more is in store, we will likely take a sideways path to get there.