Energy Futures Are Drifting Lower This Morning

Energy futures are drifting lower this morning as traders mull over the likelihood and potential impact of an EU embargo on Russian crude oil and refined products. EU commissioners are expected to finalize their proposals for the 27 member states today, however the requirement of unanimous support throughout the Union for these new sanctions could drag out any implementation for months. If passed, the EU is targeting the end of 2022 for its members to cut energy ties with Russia.

Diesel futures lead yesterday’s rally in energy prices and looked especially eager to cover the gap on the chart left by the perhaps overzealous expiring May contract. If the adage is to be believed and chart gaps always get covered, we may see June ULSD futures make a run at the $4.40 level, about 30 cents above where it is trading currently. While the strong US dollar will likely keep crude oil from matching a runaway HO contract, gasoline futures may come along for the ride, especially leading up to Memorial Day weekend which could bring a surge in gasoline demand.

The EIA published its monthly Petroleum Marketing update yesterday, highlighting the economic factors that lead to all-time high fuel prices, specifically ULSD. Multi-year high in demand combined with record-breaking lows supplies does not paint a particularly pretty picture for anyone interested in affordable diesel fuel.

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