Tropical Depression Nicholas Hovering Over Heel Of Louisiana

A handful of bullish numbers published by the DOE yesterday morning pushed energy futures to multi-month highs. The prompt month diesel contract was the most noteworthy reaching levels not seen since 2019. The drop in refined product inventories (despite cratering exports), the 7.5% decline in gasoline demand, and the decreased output of gas and diesel fueled yesterday’s rally.

Tropical depression Nicholas is still hovering over the heel of Louisiana. While repairs have been halted due to the downpours, it doesn’t sound like and new damage has cropped up with the latest storm. The EIA published a note this morning highlighting the damage caused by Ida last month and the breadth of energy infrastructure shutdowns.

Colonial restarted its main Line 2 yesterday after shutting it preemptively due to flooding from the storm. The refined product artery taking product from Houston all the way up and through the Atlantic seaboard has returned to normal operations.

A system crossing the Atlantic looks to be heading towards the Lesser Antilles next week with an 80% chance of developing into an organized storm. Another looks to be forming off the Atlantic coast next week as well, projections keep it out to sea for now.

Prices are drifting lower this morning, taking a breather from this week’s rally. American crude oil, gasoline, and diesel benchmarks are shedding ~.7% so far today while the three are poised to end the week with gains. Tomorrow’s price action could be pivotal in deciding if this 18 month-long rally will push energy prices to multi-year highs or if we will finally see a sizable pullback as the US gets back to (some form of) normalcy.

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