Diesel Traded At Lows Not Seen Since 2021 & Federal Reserve Is Set To Announce Its Latest Round Of Interest Rate Hikes Today

WTI futures lead the complex lower yesterday, dropping over 5% in Tuesday’s formal trading session. Prompt month gasoline and diesel futures followed suit as both took a ~10 cent per gallon haircut. The American petroleum benchmarks are extending their slide this morning as crude oil traded below the $70 level in the overnight session, diesel traded at lows not seen since 2021, and prompt month RBOB is breaking below its 20-week and 10 month moving averages.

General fears surrounding the prospect of a US recession are taking credit for this week’s selloff, with some citing continued inflation, regional bank failures, spending cuts, and layoffs as indicators of a general economic slowdown. Those, combined with the so-far lackluster return of Chinese demand, paint a bleak global oil demand outlook. This bearish sentiment is completely offsetting OPEC+’s intentional and unintentional production cuts.

The Federal reserve is set to announce its latest round of interest rate hikes today at 1:00pm CDT. Yesterday, the CME FedWatch Tool showed a bump of 25bps as a 94% probability, up from 50% a month ago. This morning however, the rate hike is predicted with “only” an 85% surety. This confidence change doesn’t seem to affect the expectation of a rate increase, it rather lends credence to the idea that the Fed may signal a pause in its rate hike campaign.

Yesterday, Marathon announced the completion of its South Texas Asset Repositioning (STAR) project at its refinery in Galveston Bay, TX earlier in Q1 of this year. They plan to continue to ramp up throughput on its upgraded residual hydrocracker unit through Q2 2023 that will eventually add an additional 40mbd of crude capacity and 17mbd of residual processing capacity. The largest US refinery operator also noted that it has reached its Phase 1 target renewable fuel production of 260 million gallons per year at its Martinez refinery. Phase 2 of the project is set to be completed in back half of the year and will add an incremental 470 million gallons per year of renewable capacity.

The American Petroleum Institute published its weekly US petroleum snapshot yesterday afternoon, most notably showing a ~4 million barrel drop in national crude oil inventories. The less exciting headline values: gasoline stocks up 400k barrels, diesel down 1 million barrels, and Cushing crude oil up 700k barrels. The DOE will publish its official report at 9:30am CDT.

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