Energy Futures Back On The Climb

Energy futures are back on the climb, with Brent crude pushing north of $72 for the first time in 5 months overnight. A steady economic growth report from China in the first quarter, despite so many concerns of a slowdown, is getting credit for the early move higher in equity and energy markets, along with inventory draws reported by the API.

The API was reported to show draws in crude oil and gasoline inventories of more than 3 million barrels las week, while distillates built by 2.3 million barrels. The EIA’s weekly report is due out at its normal time this morning. Watch refinery runs to see if plants are coming back online after a busy spring for planned and unplanned repairs, and import levels to see if the reinforcements have arrived yet, particularly on the West Coast, which Reuters is reporting will set a record in April.

Despite the recent price run-up and retail prices in the refined-fuel island known as California pushing north of $4/gallon this week, the EIA is still forecasting that gasoline prices across the US will be lower this summer than they were last year. IF we saw the peak of gasoline prices for the season last week, it would mean RBOB prices topped out about 21 cents below last the 2018 spring peak, although the rally started from a much lower level, making it the largest spring run in the past 3 years.

If you’ve been wondering why diesel prices have been lagging in spite of fairly tight inventories across much of the US, and the IMO spec change looming, look no further than this report showing how over the road trucking demand – which makes up nearly 2/3s of US diesel consumption – has softened over the past 2 quarters. That relative weakness shows signs of being ready to flip however as ULSD futures broke through to a new high for 2019 overnight.

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