While Crude Oil Prices Also Saw Morning Losses Turn Into Afternoon Gains Yesterday, Diesel Prices Were Left Behind
Gasoline futures staged another impressive turnaround Monday, rallying 9 cents from their morning lows to settle at a 4-month high. Prices continued higher overnight, briefly trading north of $2.80 before seeing another modest pullback this morning. The technical stage is now set for gasoline futures to make a run at the $3 mark, although as the early action this morning reminds us, it will not take a straight path to get there.
Gulf Coast gasoline prices outpaced the rest of the country by 6-8 cents/gallon Monday as colonial pipeline took the next step in the spring gasoline transition, making 11.5-pound RVP the tradeable contract and beginning to close the gap with prices on the West Coast as California grades have already converted to 6lb RVP.
While crude oil prices also saw morning losses turn into afternoon gains yesterday, diesel prices were left behind, with a huge sell-off in natural gas prices getting much of the blame for the underperformance in distillates.
Another round of protests in France has reportedly halted fuel shipments from all of the country’s refineries as workers attempt to disrupt the economy to stop changes to the state pension system. Last fall, French refinery protests contributed to the acute shortage of diesel across much of the Atlantic basin, which culminated in NYH ULSD trading up to $5/gallon in November. So far, multiple rounds of strikes in 2023 have had little impact on fuel prices, as the abnormally warm winter has suppliers dealing with excess after months of fearing shortages. While the pressure has been temporarily lifted on supplies, don’t be surprised if these latest strikes cause a price rally if they last more than a day or two.
Speaking of fearing shortages, the snapshots below from the EIA’s winter Fuels outlook last fall is a good reminder of how much of the industry was on edge about fuel supplies just a few short months ago. We’ll get the latest outlook from the agency later this morning in their monthly STEO report.
Another major factor in the world seeing substantial healing in fuel supplies over the past few months has been new refining capacity coming online, mostly in Asia and the Middle East. This morning, Kuwait reported the 2nd phase of its new 615,000 b/d refinery project has been brought online, a month or more ahead of schedule.
The FED chairman will testify before congress today on the state of the US Economy. The CME’s Fedwatch tool shows that traders are split roughly 50/50 on whether or not we’ll see a combination of rate increases exceeding 75 basis points in the next 4 months and are eagerly awaiting today’s statements to speculate endlessly over whatever is said. Since the correlations between energy prices and equity and currency markets has been fairly soft for the past several months, this may have less influence on fuel prices than we’ve seen in years past, but those patterns can change in an instant depending on the mood and/or programming of the traders involved.
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