There’s A Tug Of War Between Gasoline And Diesel Prices This Week As RBOB Futures Come Under Heavy Selling Pressure
There’s a tug of war between gasoline and diesel prices this week as RBOB futures come under heavy selling pressure, while ULSD looks poised to make another run at $4.
The dichotomous action between gasoline and diesel prices pushed the premium for ULSD more than 90 cents/gallon above RBOB futures, something we’ve never seen outside of the chaotic early days of the war in Ukraine. When the October contracts take the prompt position next week, the spread will be north of $1/gallon as RBOB transitions to its winter spec, which may also explain part of the weakness in the gasoline contract recently as traders realize that the driving season is rapidly coming to an end.
US equity markets are another bearish influence on gasoline prices lately as the correlation between the two has been the strongest in the past two years, just in time for the summer stock rally to run out of steam. Yesterday was the worst day in 2 months for the S&P 500, and it appears that the sellers trickled into the gasoline arena. Distillates meanwhile seem to be ignoring the move in stocks and more in line with the fact that the world is still facing a severe supply shortage which may get worse this winter.
Speaking of which, the Saudi Energy Minister (an outspoken critic of speculators in the oil market) expressed his displeasure with oil markets trading lower in the past 2 months despite the global energy supply crunch, and suggested it may cause OPEC to cut production. That statement helped oil prices bounce after an early selloff Monday which was blamed on news that negotiators were closing in on a deal with Iran, even though the US state department says significant gaps remain.
Click here to download a PDF of today's TACenergy Market Talk.
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Week 17 - US DOE Inventory Recap
The Energy Complex Is Trading Modestly Lower So Far This Morning With WTI Crude Oil Futures Leading The Way
The energy complex is trading modestly lower so far this morning with WTI crude oil futures leading the way, exchanging hands $1.50 per barrel lower (-1.9%) than Tuesday’s settlement price. Gasoline and diesel futures are following suit, dropping .0390 and .0280 per gallon, respectively.
A surprise crude oil build (one that doesn’t include any changes to the SPR) as reported by the American Petroleum Institute late Tuesday is taking credit for the bearish trading seen this morning. The Institute estimated an increase in crude inventories of ~5 million barrels and drop in both refined product stocks of 1.5-2.2 million barrels for the week ending April 26. The Department of Energy’s official report is due out at it’s regular time (9:30 CDT) this morning.
The Senate Budget Committee is scheduled to hold a hearing at 9:00 AM EST this morning regarding a years-long probe into climate change messaging from big oil companies. Following a 3-year investigation, Senate and House Democrats released their final report yesterday alleging major oil companies have internally recognized the impacts of fossil fuels on the climate since as far back as the 1960s, while privately lobbying against climate legislation and publicly presenting a narrative that undermines a connection between the two. Whether this will have a tangible effect on policy or is just the latest announcement in an election-yeardeluge is yet to be seen.
Speaking of deluge, another drone attack was launched against Russian infrastructure earlier this morning, causing an explosion and subsequent fire at Rosneft’s Ryazan refinery. While likely a response to the five killed from Russian missile strikes in Odesa and Kharkiv, Kyiv has yet to officially claim responsibility for the attack that successfully struck state infrastructure just 130 miles from Moscow.
The crude oil bears are on a tear this past week, blowing past WTI’s 5 and 10 day moving averages on Monday and opening below it’s 50-day MA this morning. The $80 level is likely a key resistance level, below which the path is open for the American oil benchmark to drop to the $75 level in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Energy Futures Are Drifting Quietly Higher This Morning
Energy futures are drifting quietly higher this morning as a new round of hostage negotiations between Israel and Hamas seem to show relative promise. It seems the market is focusing on the prospect of cooler heads prevailing, rather than the pervasive rocket/drone exchanges, the latest of which took place over Israel’s northern border.
A warmer-than-expected winter depressed diesel demand and, likewise, distillate refinery margins, which has dropped to its lowest level since the beginning of 2022. The ULSD forward curve has shifted into contango (carry) over the past month as traders seek to store their diesel inventories and hope for a pickup in demand, domestic or otherwise.
The DOE announced it had continued rebuilding it’s Strategic Petroleum Reserve this month, noting the addition of 2.3 million barrels of crude so far in April. Depending on what the private sector reported for last week, Wednesday’s DOE report may put current national crude oil inventories (include those of the SPR) above the year’s previous levels, something we haven’t seen since April of 2022, two months after Ukraine war began.
The latest in the Dangote Refinery Saga: Credit stall-out, rising oil prices, and currency exchange.
Click here to download a PDF of today's TACenergy Market Talk.