Prices Consolidating While The World Waits For Recovery

Energy contracts are having a hard time getting on the same page this week, as prices seem to be consolidating while the world waits to see if economic activity will continue to recover even as COVID cases rapidly rise.

Diesel prices are seeing a modest pullback after reaching a four-month high Monday, joining the rest of the complex in neutral technical territory, that looks like it could maintain the back-and-forth while going nowhere with trading pattern in place for a while.

While gasoline prices slipped in Monday’s session, ethanol prices surged by 14 cents, to their highest levels since December, as tight supply in the Argo trading hub and reduced corn planting overshadowed an 18 percent increase in domestic ethanol production over the past month.

Monday had a trifecta of major new for U.S. pipelines. A judge ordered the Dakota Access pipeline be closed and emptied in the next 30 days, the Supreme Court refused to allow construction of the Keystone XL line, and the Atlantic Coast pipeline project was cancelled, even as Berkshire Hathaway announced it was acquiring one of the owners of that project. While those three stories are certainly interesting in the future of fossil fuels debate, near term only the Dakota Access shutdown appears that it might have impacts on refinery operations, as Midwestern plants that rely on the Patoka IL crude oil hub may need to scramble to find replacement supply options, and may put a temporary end to the niche business of exporting North Dakota crude from Gulf Coast ports.

Money managers (AKA large speculators, AKA hedge funds) continue to be unenthusiastic about NYMEX petroleum contracts, with minimal changes in their holdings of WTI, RBOB and ULSD contracts last week, while total open interest in those contracts remains well below historical levels.

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