Tariff Storm Defined April Activities To Reshape NYMEX Futures Curve

Energy futures are stumbling to end April trading with ULSD prices leading the slide this morning after a wave of selling Tuesday. May RBOB and ULSD contracts are expiring today. Most regional cash markets have already flipped to trading against the June (RBM/HOM) contracts, but for NYH and Group 3 buyers, be sure to look at the 2nd contract for price direction today.

What a month it’s been. Gasoline prices started the month trading at 6-month highs, only to reach a 6-month low 1 week later as the tariff storm swept the globe. WTI and ULSD both reached 4-year lows on April 9th before staging a rally for most of the next 3 weeks, only to end the month on a softer note. The rapid-fire pace of announcements and policy head-fakes has kept energy and equity markets on a rollercoaster ride since then and has reshaped the forward curve for NYMEX futures. As the chart below shows, most contracts have shifted from a steady backwardation over the next 3 years to some form of contango over the next 12 months, suggesting that supply will exceed demand – which is a signal of the energy markets pricing in some form of economic slowdown. The price action over the past couple of days also suggests that even though the President may be trying to step back from the tariff abyss, the economic slowdown is already upon us.

While outright prices and time spreads have weakened substantially over the past 4 weeks, crack spreads have actually managed to rally to their best levels in a year for several U.S. markets, with shrinking inventories amidst less competition from biofuels contributing to that boost in earnings after 2 brutal quarters for many refiners. Of course, 2 California refineries have announced their plans to close down their operations during the past 6 months, which demonstrates the billion-dollar game of chicken being played by these facilities both with their competitors and their regulators.

The API reported more draws in refined product inventories last week, with gasoline stocks down 3.1 million barrels, while distillates dropped by 2.5 million. Crude oil stocks were estimated to increase by 3.7 million barrels on the week. The DOE’s weekly report is due out at its normal time this morning.

Feeling like the oil and products markets are a challenge lately? You’re not alone. Koch announced Tuesday that it was exiting the crude and refined products trading part of its business to focus on its other “more customer-oriented” trading activities. This exit won’t directly impact its Flint Hills refining and shipping operations.

The EIA Tuesday highlighted US refined fuel imports, which decreased in 2024 after growing in 2023. Canada was once again the largest supplier of U.S. fuel imports, with New England the primary target, while Korea and India joined the top 5 and will have more of an impact in coming years as the California refineries close down.