Another Day, Another 60 Cent Swing In Diesel Prices
Another day, another 60 cent swing in diesel prices. Last week, ULSD futures set a record with a 34 cent price increase and a 45 cent trading range in 1 day, and this week, we’ve already seen a 51 cent increase followed by an 60 cent drop this AM. To put that in perspective, there had only been 3 months since 1999 that have experienced a 70 cent trading range, and we’ve already had an 87 cent swing this morning.
Gasoline futures haven’t been quite as volatile as ULSD, but still the past 7 trading days all rank in the top 10 all time for biggest swings on the gasoline contract. West Coast physical gasoline has surged well beyond futures as a rash of new refinery hiccups, and the loss of a crude import option from Eastern Siberia seemed to combine Tuesday to send spot values north of $4/gallon, nearly 80 cents above priced in the middle of the country.
While East Coast gasoline prices are 50 cents or more below their West Coast cousins, there have been multiple terminal outages reported in the past 24 hours as cargoes destined for the US have been diverted to Europe, putting strain on the NYH barge system. These extremes on the coasts create the first real test for US consumers that have railed against receiving Russian crude and product imports, and now are getting their wish.
The API reported a large decline in US diesel inventories last week of nearly 5.5 million barrel, which seemed to help ULSD continue surging to a fresh all-time high late Tuesday afternoon, but is an afterthought this morning as diesel prices now are experiencing their biggest single day drop in history (47 cents) 1 day after they experienced their biggest daily increase of 51 cents. The DOE weekly report will be released at its normal time this morning, and you’ll be forgiven if you don’t pay attention to it.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllThe Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.
The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.
We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.
The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.
There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.
As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.
Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.