ULSD Prices Down Almost 14 Cents On The Day After Being Up Nearly A Nickel Overnight

Energy futures saw a heavy wave of selling in the past hour that had ULSD prices down almost 14 cents on the day after being up nearly a nickel overnight, while RBOB prices dropped a dime from their overnight highs. But, as has come to be the March norm, if you don’t like those prices just wait 15 minutes and they’ll change.  

Prior to this morning it had been another strong week for most petroleum contracts, and so far the wave of selling (and subsequent bounce) hasn’t threatened any trend-lines, so it’s too soon to say this is anything more than a brief pullback. 

There are 5 more trading days for the April ULSD contract, which has already smashed the all-time record for highest price, and has now broken the record for the largest single month timing spread, trading 37 cents over the May contract earlier today. That extreme backwardation continues to wreak havoc on basis markets around the country, with some regions seeing record lows, while others are seeing record highs, depending on which side of that HO curve they’re trading.

A promise to ship more US LNG to Europe is getting the headlines, but really it’s more likely the lack of European sanctions on Russian energy that are contributing the selloff, as the actual capacity for more LNG shipments in the near term are limited. 

Why are LNG shipments limited when the US has so much natural gas and has been expanding its export capabilities for years?  The main reason is those LNG export facilities were already at or near capacity, as they signed long-term commitments with buyers in order to ensure the multi-billion dollar investments needed would pay off, and then a distant second because the FERC recently decided to make the process for approving new natural gas pipeline systems extremely challenging to protect the environment, which makes some yearn for the days of The Big Inch.

The US charged 4 Russian Government officials for hacking operations targeting US energy facilities and a Saudi oil refinery from 2012-2018.  The timing of the charges is no doubt intended to add pressure to Russia, and to US companies that have been warned repeatedly of the potential for cyberattacks. Anyone in the refined products industry shouldn’t need a reminder of that threat as we approach the 1 year anniversary of the Colonial pipeline shutdown. 

Meanwhile, in other refinery news, unconfirmed reports this week have surfaced that Russian forces accidentally bombed their own oil refinery this week, in what would be a nice bit of karma to end the week with, if it’s true.

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