ULSD Prices Hit 14 Month Lows, Rally Attempts Underway After Jobs Report

Another wipeout Thursday pushed energy and equity markets sharply lower and set the stage for diesel prices to hit their lowest level since January 2022 overnight, only to see an impressive bounce in the past hour. Prices are attempting to rally in the aftermath of the February jobs report, even though a crisis at two West Coast banks is sending ripples of panic across the financial industry and adding to the already negative sentiment that’s gripped markets for much of the week. 

Energy futures didn’t react much initially to the February payroll report that showed another healthy month of growth with 311k jobs added, while the December and January estimates were revised lower. Both the headline and U-6 unemployment rates ticked up by .2% despite the job growth as the labor participation rate increased, AKA more people started looking for jobs that weren’t counted in the labor force previously, which could be taken as a bullish signal for both stocks and energy futures and may explain why prices started rallying about 10 minutes after the report was released.

The adage that there’s no such thing as a triple bottom held true for ULSD as prices touched $2.66 for a 4th time in a month Thursday before breaking down to new 13-month lows at $2.6294 overnight. The fact that prices did manage to rally a dime after setting that new low may encourage some bottom fishing and we’re certainly due for a corrective bounce after the 25 cent drop this week. While the rally has picked up steam heading into the 8 o’clock hour, there’s still more work to do to break the downward trend that’s taken hold this week with a rally above 2.80 needed for ULSD to look less vulnerable. If prices fail to settle back above the $2.66 range, the charts are giving strong favor to a quick move to $2.50 or below before the end of the month.

French strikes continue to disrupt refinery output for a 4th day. This news has been largely shrugged off in the so much other negative sentiment this week but could still be a factor in a price rally if it continues next week.

Near term demand doesn’t look like it’s quite ready to ramp up as spring is taking its sweet time arriving across much of the country, while another round of winter storms prepare to batter both the East and West coasts.

Unintended consequences: Why big oil may end up receiving many of the tax credits offered in the climate law branded as an inflation reduction act.

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