After A Strong Start Wednesday, Energy Prices Saw Another Wave Of Heavy Selling

After a strong start Wednesday, energy prices saw another wave of heavy selling, which pushed most gasoline spot prices to their lowest levels since Russia invaded Ukraine. We’re seeing a similar pattern in the early going this morning as 9 cent overnight gains for RBOB futures have shrunk to 2 cents in the past couple of hours, and diesel prices are flat after trading up nearly 7 cents overnight. 

The pullback has products moving closer to their weekly trend-lines, but we’ll still need to see another 7-8 cent decline for gasoline and 10-12 cents for diesel before the bullish trend faces a real threat.

The waves of selling may have to do more with concerns about the FED’s war on inflation, and another announced SPR release (half of which the US already announced last week) than it does on near term fundamentals, because the DOE’s weekly report continued to provide plenty of data points to prove just how tight the supply network is relative to the past 10 years.   

Diesel inventories did see small increases for a 2nd straight week, but remain well below their seasonal range, and imports of distillates reached a 9 month low reminding us that help is not on the way.  Not surprising given the $7 price tag around New York, jet fuel supplies are also dropping well below their seasonal range and giving us the most eye opening example of the logistical challenges being experienced by shippers these days.  (See DOE charts below)

Good news: US refiners are running at pre-pandemic rates, keeping the country in a relatively strong position vs many countries struggling to find supply these days. The bad news is refinery utilization is in the mid 90s already, which is at the top end of its seasonal range, and suggests that there may not be much more left to give as we enter the driving season, and any refinery disruptions (don’t say Hurricane) are going to be magnified as a result.

Other good news for those that want to see prices pull back is that US crude oil output was estimated to increase by 100mb/day for a 2nd straight week, reaching a post-pandemic high of 11.8 million barrels/day.  

A few interesting reads on how the supply dominoes are falling globally. How Chinese teapot refineries are flying under the radar buying Russian Crude. How India is replacing higher premium Saudi Barrels with discounted Russian supply.  

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.