Strong Wave Of Selling Has Wiped Out Gains

So much for that bounce. A strong wave of selling has wiped out the gains of the past few trading sessions, and put most energy contracts on the cusp of fresh multi-month lows and potentially a more severe drop in the coming days.

The latest perceived escalation in the US/China trade war (rumors of rare earth metal tariffs) is getting much of the blame for the sell-off in equities and energy markets that started Tuesday afternoon and carried through the overnight session.

Both ULSD and RBOB futures are currently just a few ticks away from their May lows, and threatening another 10 cent drop in short order should this short-term chart support fail to hold.

Ethanol prices were spiking Tuesday, along with corn futures as the brutal stretch of spring weather continued across the Midwest – further delaying planting that’s already weeks behind schedule in several states. RIN values have not followed suit as the recent run-up should not impact blending operations with current ethanol inventory levels remaining ample for blending, and there’s no change in sight on the RFS.

That same rough weather continues to disrupt crude and refined product flows on a more limited scale, with a few crude pipelines around the Cushing OK hub reducing rates, which was helping WTI outpace Brent in the past few sessions, but now seems to be acting as those closures may prevent more oil from leaving that it will delay deliveries to the hub.

In addition to the problems with crude flow, Holly’s refinery in Tulsa also remains closed as a precaution as floodwaters come perilously close to the plant – and nearby terminals – while the CVR refinery in Wynnewood is reported to be restarting units that were shuttered due to storms last week.

The weekly inventory reports are delayed due to Memorial Day, the API will be out this afternoon and the EIA/DOE report will be out tomorrow at 10am central.

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