The Wheels Are Off The Energy Bus With Diesel Leading The Way Once Again, Trading Down By More Than 10 Cents

The wheels are off the energy bus with diesel leading the way once again, trading down by more than 10 cents in the early going, and now down more than 20 cents for the week. The big slide in ULSD comes after a valiant attempt to erase Tuesday morning’s big losses came up short in the afternoon, in a sign that the bulls may be throwing in the towel.  RBOB futures hit a low of $2.3000 overnight, the lowest level since May 4th. 

Oil futures are trading down $2/barrel in the early going despite Saudi Arabia confirming its intent to hold voluntary output cuts through year end. The cartel’s leader also noted that it expects global oil demand to continue growing this year and next, and increase by 25% through 2045, which will require investment in all forms of energy. 

Oil traders also seem to be ignoring a 4-million-barrel decline in US inventories reported by the API yesterday, in yet another sign that we may be witnessing money managers bailing out of long positions they’d been steadily accumulating during the rally over the past 3 months. Gasoline inventories saw a build of almost 4 million barrels last week, while distillates saw a small increase of less than 400,000. The EIA’s weekly report is due out at its normal time this morning. 

Adding to the downward pressure on a day when the bears seem to be in control is a report that Russia is already preparing to ease its export restrictions on refined products. 

For the 2nd time in 3 weeks New England is staring down a tropical storm. Philippe has shifted West over the past 48 hours and is now likely to make landfall in either Maine or Nova Scotia over the weekend based on current projections. The good news is this storm is nowhere near as strong as Lee was in September, the bad news is it seems to be shifting West instead of East like Lee did, which spared the region from most of the potential impact.  While 60 mph winds won’t scare many New Englanders, it will be enough to disrupt vessel traffic for a day or two as it passes, and will bring more heavy rain to the region, which has had plenty over the past month. The storm will also be another headache for workers at Irving’s refinery in St. John NB, which were already delayed in a major maintenance project due to Lee.

Marathon’s Galveston Bay (FKA Texas City) refinery made its seemingly obligatory weekly filing to the TCEQ Tuesday noting an upset at a sulfur recovery unit. That filing came just hours after reports from Energy News Today that the facility had restarted an FCC unit following a fire in early September.

The EIA this morning noted that the US had set a new record for LNG exports in the first half of this year, a figure that should continue to grow in the coming years as new export facilities come online. Monday the agency also highlighted a record in refined product exports, but notably gasoline and diesel fuel exports were both lower on the year as world markets adjusted to the Russia to Europe product flow halt, while a surge in Propane deliveries made up the difference. Those export flows are likely to remain a major story for US refiners over the coming year as they face large capacity additions in Asia, and maybe new facilities in Mexico and Nigeria that could force them to find new homes and perhaps start to refill the domestic tanks that have been running low for the past 2 years.

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