Energy Futures Stabilize, Fed Issues 25bps Bump, Crude Stocks Drop

Reversal Thursday? RBOB has seen almost 22 cents shaved off the prompt month contract in May and HO is following close behind with 15 cents shed. After consecutive days of heavy selling to kick off the month, energy futures opened the day just on green side of flat suggesting traders aren’t quite ready to dip down to support levels in the low $2 range.

The Federal Reserve concluded a two-day meeting yesterday with the decision to further tighten monetary policy in a continued effort to fight inflation by raising the interest rate target range by 25 basis points. The FOMC statement issued after the meeting removed the language stating they expect continued increases, signaling the potential for an end to the rate hikes. The European Central Bank is expected to react similarly today, both of which are likely contributing to the ease in futures selling this morning.

The DOE reported crude stocks down 1.3 million barrels last week despite a fifth straight week of SPR releases, an increase to the adjustment factor, a downturn in demand, and decreased refinery runs. PADD 4 refinery throughput saw a large drop last week as Plant 2 at the Suncor refinery complex in Colorado was shut down until June for planned maintenance. This year kicked off with the same refinery shutdown which sent Denver rack pricing north of a dollar over Group 3 spot prices. Those spreads started to grow again in April at the start of the planned turnaround, albeit less enthusiastically than when the plant was knocked offline due to severe winter weather. 

Even with increased imports and another week of declining exports, diesel stocks remain low across the country with all 5 PADDs sitting well below average levels. West Coast inventories look particularly low, but largely due to the exclusion of renewable diesel in those figures. However, implied demand for diesel did see an uptick last week with a corresponding drop in the days forward cover calculation. Gasoline inventories showed a net increase last week but are still hovering underneath the 5-year range with above average demand and exports. Charts included below.

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