The Recover Rally In Energy Prices Ran Out Of Steam Thursday

The recover rally in energy prices ran out of steam Thursday, and a modest pullback overnight has led to some heavier selling across the board around 8am. There’s very little in the way of market driving news so far this week, with headlines continuing to focus on central bank reactions to stubbornly high inflation, and China’s rapidly recovering economy.   

The correlation between energy, equity and currency markets remains weak, so we’re not seeing much in the way of a consistent influence from the major financial stories of the day.

Charts continue to send conflicting signals, with gasoline looking like it could be poised to kick off its annual spring rally, while diesel still looks vulnerable to a big flush lower. Volatility for energy contracts continues to hold at levels that we never saw in 2022 as the world seems to be breathing a sigh of relief that the Russian embargoes haven’t created more chaos.

Speaking of which, a Dallas FED Study published last week takes a deeper look at how trade diversions helped soften the impact of the Russian embargos. Reuters supported the FEDs study with reports that Chinese diesel exports spiked again in December, while Indian refinery runs reached record levels in January, both of which seem to be contributors to diesel prices reaching pre-war levels in the past couple of weeks.

The huge storm that dumped snow in California earlier in the week continues to sweep across the country, turning its eye on the upper Midwest and East Coast today after hammering the south Thursday. At least a dozen refineries stretching from West Texas to Tennessee felt the storm’s high winds yesterday, but so far there are no reports of damage, although some disruptions due to power blips are likely. Shreveport, LA did have a tornado touch down overnight, but there’s no word yet on how Calumet’s refinery – which was hit hard by the Christmas blizzard – fared in this latest event. 

Koch industries named a new Co-CEO, with a new last name, opening control of the 2nd largest private company in the US outside of the namesake family. The new CEO Dave Robertson previously ran the company’s Flint Hills refining group.

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