It’s Been A Wild 24 Hours For Energy And Equity Markets Around The World

It’s been a wild 24 hours for energy and equity markets around the world with central bank action creating ripple effects far and wide, while the war in Ukraine takes a back seat in the headlines, but continues to roil the global supply chain. Gasoline futures hit $3.81 overnight, marking a 50 cent drop from Friday’s high trade, but have since bounced by more than 7 cents off of that support and managed to keep its bullish chart pattern intact for now. Diesel prices meanwhile surged 15 cents during Wednesday’s session, but are giving back most of those gains this morning, seemingly following the lead of the stock market short term.

The FED raised its federal funds target rate by 75 points Wednesday, the first time in 28 years they’ve made an increase of that size. The FED Chair also made it clear that another move of that size in the near future may be necessary to tame inflation that admittedly was worse than the central bank thought possible not long ago. Fed fund futures now show an 80% probability that we’ll see at least 125 points or more of increases in the next 6 months, and several other central banks are following the FED’s lead on raising rates, with the Swiss notably surprising many today with their first increase in 15 years.

After some wild back and forth Wednesday saw stocks finish on a strong note, most equity indices have given back those gains and more overnight, and are threatening a technical breakdown that could lead to much lower prices and many more news photos of the head in hand trader. 

The White House sent letters to US refiners, placing blame on them for high gasoline prices and asking them to add back the capacity that was taken offline since the pandemic, which the letter notes several times happened prior to this administration taking control.

The industry responded quickly with numerous letters detailing the hundreds of millions spent in recent years just to maintain the lower capacity levels we see today, and laying out their own plans for the government to help debottleneck parts of the supply chain. 

Yesterday’s DOE report showed that US Refiners continue to run at their highest utilization rates of the past 5 years, and several continue to struggle with operational upsets before or after required maintenance, leaving essentially no room to increase further. 

So can any of the refineries shut over the past 2 years come back from the dead? Theoretically some can, and the current margin environment is giving the potential for some to consider it, but the complexity of restarting a facility after a long-term shutdown, and the long-term prospects for a world that just a few months ago wanted no more fossil fuels to be processed makes these options a big of a long shot . Certainly not impossible for some, but even if they said yes today, it would be months before any could be making fuel again. See the table below for those that in theory could try to restart.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.