Another Day, Another 20 Cent Swing In Energy Prices In The Overnight Hours As The War In Ukraine Continues To Get Worse

Another day, another 20 cent swing in energy prices in the overnight hours as the war in Ukraine continues to get worse, and there’s little hope for a resolution on the horizon.  

The past 4 trading days each rank in the top 11 all-time for the largest daily price swings in ULSD futures dating back to the early 1980s, and there were entire years where we didn’t see prices swing like we have the past couple of days.  So, if you’re feeling a little worn out after this week’s market chaos you have good reason, and also a good reason to be thankful your biggest concern is big swings in fuel prices.

Basis markets around the country have had some big swings of their own as both the US Gulf Coast and NY Harbor are seeing multi year highs for ULSD spreads. 

The phenomenon of tight coastal markets and well supplied mid-continent markets shows up well on the Diesel basis chart below as Group 3 and Chicago values are trading 25 cents below the Gulf Coast and 35 cents below NYH values as anything that can hit the water has found a strong bid to (theoretically) supplement the supplies no longer being exported from Russia.  Meanwhile, the landlocked barrels are dropping to offset the spike in cash spreads, as Midwest supplies are ample and don’t command the extreme backwardation we’re seeing elsewhere.

The February jobs report showed strong growth in the US, with an estimated 678,000 increase in payrolls for the month, and the estimates for January and December were both revised higher.   The headline unemployment rate dropped to 3.8%, which is getting close to where it was prior to COVID hitting 2 years ago.  The U-6 (aka real) unemployment rate actually ticked slightly higher from 7.1 to 7.2%.

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