Risk-Off Sentiment, Economic Concerns Push Gasoline Futures Lower

The selloff continued for energy contracts overnight before buyers stepped in around 7:45 to push WTI and ULSD prices to breakeven levels. There’s a feel of risk-off sentiment in energy and equity markets the past couple of days as the FED continues to explain its plan to continue pushing interest rates higher after a pause, while other major markets are flashing signs of economic slowdown.

Gasoline prices were leading the move lower this morning, down more than a nickel at one point, aided by a collapse in ethanol RIN values that’s taking some pressure off of refinery cracks spreads that need to be high enough to offset the cost of the RFS.  

D6 RIN values were climbing Tuesday, trading back up to $1.46 for 2023 vintage before a Reuters report in the afternoon that suggested today’s long-delayed EPA ruling on the RFS volume thresholds would increase total biofuel quotas, but lower the ethanol volumes from earlier proposals.  Sellers immediately emerged in the wake of that report, with trades of $1.39 late Tuesday (after-market assessors were done for the day) and already this morning, trades below $1.30 have been heard, marking the lowest levels since April 2022. If the reported change is true, it would seem to be a slap in the face to the ethanol lobbying group that just last week agreed to allow the EPA to delay its final ruling to today despite a previous court-ordered deadline of June 14th.   

Tropical Storm Bret continues to churn towards the Caribbean, but has been downgraded in forecasts which now suggest the storm won’t reach hurricane strength as was predicted earlier. The weaker strength also means the storm is expected to stay on the southern edge of its range, which keeps it moving west towards Central America and not hooking north towards the US.  

The storm system chasing Bret is given 80% odds of developing over the next week by the NHC, and this system is projected to hook north as it moves West, making it a potential threat to the East Coast, although many early models suggest this system will stay out to sea as it moves north. 

Both Tulsa OK loading racks resumed operations Tuesday after storms knocked out power to a large area around the city earlier in the week. The Holly refinery is also reported to be attempting restart, which will alleviate the concerns of fuel shortages if it can manage to get back online safely in the next couple of days. 

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