Many Suggest We’re Due To See Another Slowdown In Economic Activity To End The Year

Diesel prices staged another big rally Tuesday, with the October ULSD contract adding more than 11 cents from Friday’s settlement before giving back some of those gains overnight.  Brent crude prices broke the $90 mark and WTI reached $88 for the first time since November following reports that Saudi Arabia and Russia would extend their voluntary output cuts. 

A WSJ article highlights why the types of crude being held out of circulation are causing diesel prices to rally and offering a harsh reminder that we’re just one cold snap away from facing another supply shortage.    

A Reuters article this morning highlights that consumers had enjoyed lower fuel prices than a year ago for most of 2023, but are now paying more and California drivers are once again staring at record high prices, which many suggest is yet another reason we’re due to see another slowdown in economic activity to end the year.

Tropical Storm Lee has formed and is expected to become a major hurricane in the next few days and approach the East Coast of the US next week. Most early forecast models have the storm hooking north just in time to stay off-shore, but there is plenty of uncertainty in those early projections and not much margin for error, so expect this system to stay front and center in the news the remainder of the week as it could still become a major threat to the East Coast population centers. There is another storm system given 60% odds of forming behind Lee, but this storm is expected to form far enough north that it won’t be a threat to land.

The timing of Lee’s approach to the East Coast will make a congressional move to liquidate the East Coast gasoline reserve more controversial than it otherwise might be.  

RIN values have moved sharply lower in recent weeks, with D4 values dropping more than a nickel reaching an 18-month low in the low $1.30s Tuesday. RBN Energy has been beating the drum for some time that the rapid increase in Renewable Diesel production would eventually lead to a rapid decline in RIN values, and it appears we may be witnessing that now.

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