Diesel Prices Are Trying To Bounce This Morning After A Wave Of Selling Knocked Refined Product Prices Sharply Lower In Monday’s Session

Diesel prices are trying to bounce this morning after a wave of selling knocked refined product prices sharply lower in Monday’s session. China continues to be the easy target to blame daily price moves on, while today’s election results could bring more volatility to various markets as traders debate the impact of a potential reset in congress.

Basis markets continue to see big swings this week, with West Coast gasoline levels surging once again following reports of an upset at a California refinery. LA Diesel basis seemed to jump on the bandwagon, trading up 30 cents from last week’s steep discounts of 50 cents below futures to “only” a 20 cent discount Monday. That still leaves prompt diesel in LA valued $1.20 less than barrels in New York as NYH spots held at a $1/gallon premium to futures and most other regional markets. Keep in mind that before this year, the highest premium for NYH spots was around 14 cents during the polar vortex of 2014. Gasoline in the harbor is also fetching an unusually high premium of 40 cents above RBOB futures, which is helping push prices for space on Colonial close to multi-year highs.

Ethanol prices continue to rally as another potential rail strike could begin as soon as November 19. Another union voted to pass the agreement made back in September, but 2 holdout groups remain that could hold up the entire deal. RIN values continue to hold near their highest levels in 16 months, as the market awaits word from the EPA on how they’ll update the RFS for next year. A Reuters article this morning highlights the surge in renewable diesel production in the US this year, and why that may reignite the Food vs Fuel debate. 

Nicole is forecast to become a Category 1 Hurricane before hitting the central east coast of Florida sometime on Thursday. The fuel ports at Ft Lauderdale/Pt Everglades, Cape Canaveral and Jacksonville are all under a Tropical Storm warning, with Cape Canaveral just 24 miles north of the current projected path of the storm, and on the “dirty” side that will be pushing water inland. That could certainly create some localized supply issues depending on what damage is done and how long the port has to remain closed, but should not have a major impact on supply in the state as long as the other terminals continue operating. Nicole is also expected to bring heavy rains all along the East Coast as it moves inland through the weekend, which could create a big hit to demand.

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