Diesel Prices Continue To Lead The Energy Complex On A Recovery Rally

Diesel prices continue to lead the energy complex on a recovery rally, adding more than 26 cents/gallon since Friday, and dragging gasoline prices up more than 10 cents after hitting a new 2022 low early in Monday’s session. 

Cold weather in Europe and a big winter storm in the US are getting some of the credit for the recovery rally in diesel prices, as European nations continue to disagree on a price-cap plan for Russian natural gas, and the region gets its first big test of the electric grid since the start of the war. 

China’s COVID reopening continues to be a wild card for energy markets, as some see a spike in oil and products demand looming that could send prices sharply higher, while others see another round of outbreaks shutting down the new plan to ease restrictions.

The CPI reading for November sent equity futures sharply higher after its release at 7:30am (and pulled refined products up another 2-3 cents) as the inflation gauge came in below many forecasts, which gives the free money crowd a reason to beg the FED to stop raising rates. The FOMC’s next announcement is scheduled tomorrow with the CME’s fedwatch tool showing a 100% probability of at least another 50 point rate hike, while 23% of the market is betting on a 75 point increase, down from 26% prior to the CPI announcement. 

The Keystone pipeline remains shut as repair crews work to determine the cause of last week’s leak, and recover the oil spilled. Markets continue to shrug off the news as apparently traders expect the line to come back soon, and alternative options to be sufficient in the meantime.

OPEC’s monthly oil market report for December is due out later this morning. 

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