Crude Oil And Gasoline Prices Are Lower This Morning Than They Were On The First Day Of The Russian Invasion Of Ukraine

Crude oil and gasoline prices are lower this morning than they were on the first day of the Russian invasion of Ukraine, as a breakdown in technical support and sentiment for consumption both seem to be pushing prices lower. RBOB and WTI were attempting to make small gains this morning after trading in negative territory overnight, but if the attempt to bounce doesn’t accelerate soon, the charts suggest we’re in for another wave of selling. 

Gulf Coast and Midwestern gasoline spot prices dipped below $2.50 on implied values overnight, which could mean retail prices below the $3 mark in some markets if values hold around this level for another week or more. Unless the market reverses course, more markets may join the sub $3 retail club in another 6 weeks as the transition to winter-spec gasoline ensues, and producers can once again start blending more butane, which is $1.25/gallon or more cheaper than gasoline.

Diesel prices resisted gasoline’s pull lower for the start of the week, but are catching up now that the bottom end of the descending triangle gave way, and quickly dropped another 12 cents after taking out that chart support before finding a temporary floor just above $3.20 overnight. Fundamentally, it’s difficult to make a case for diesel prices continuing to fall, especially with demand destined to ramp up in the fall.  Read here for another argument on why now may be a good time to buy ULSD.   

One headline that may explain why diesel prices are down more than a dime this morning even as gasoline prices were able to move into positive territory: Germany said it could keep its nuclear power plants operating this winter, which will help ease the shortage of natural gas and distillates needed to power the region. 

The July payrolls report knocked stock prices, along with gasoline and WTI, back into negative territory as another strong reading on the US job market seems to have spooked the machines that base their bets on easy money from the FED, which is sure to be encouraged by the fact that their first 4 interest rate increases haven’t hurt the labor market. Adding more than 550,000 jobs to the government estimate since the last report will also help the argument of those that say the US is not in a recession, despite 2 straight quarters of negative GDP growth.

The tropics remain eerily quiet as we approach the busy part of the Atlantic hurricane season. Officially, the NHC says no new tropical cyclones are expected in the next 5 days, but longer range models are already tracking 2 potential systems moving over Africa, that could develop as they move out to sea next week.  Colorado State’s latest forecast for the season was reduced by 2 named storms, but still suggests we’re in for a busy year with 16 more storms yet to come. The weather channel forecasters seem to agree noting yesterday that 90% of the storm activity is yet to come. 

Click here to download a PDF of today's TACenergy Market Talk.