Energy Prices Are Taking A Breather In The Wake Of The Great Christmas Blizzard Of 2022

Energy prices are taking a breather in the early trading Wednesday, pulling back slightly after a strong 2-day rally in the wake of the great Christmas blizzard of 2022™. 

The list of refineries that were knocked offline due to the winter storm continued to grow Tuesday, even as restart efforts were well underway for many, as much warmer weather takes hold.  At least 23% of the US refining capacity was hit by this storm, and many will need weeks to fully restore operations. That said, the severity and duration of this storm along the Gulf Coast was much less than what we saw in February of 2021, and early estimates suggest the lasting damage to facilities will be relatively minor in comparison, even though the impacts appear to be more widespread.

The rash of outages has caused ripple effects along the pipeline and terminal networks across most markets east of the Rockies, although the impact of outages and delays is less severe given we’re in the midst of the winter demand doldrums. Basis markets are also hinting that the impact of this event will be muted as the urgent buying seen Friday quickly slowed during Tuesday’s session as many traders seem content to wait and see what the actual production losses will be, and whether or not anyone will be in the office to care this week.  

Vladimir Putin decreed that bans the sale of oil to countries who aren’t buying it anyway in retaliation for price caps. It’s worth noting the empty threat has a July 1 expiration date and leaves the door open for exceptions to avoid interfering with flows to India and China which may need ships insured by the “banned” nations to continue some purchases.

ULSD futures came within ½ cent of touching their December highs Tuesday before pulling back by 10 cents, which puts a new layer of chart resistance at the $3.41 range. If prices manage to break through and hold above that level, there’s not a lot on the charts to stop another run at the $4 mark in early 2023.   

RBOB saw a similar pattern, coming within a penny of its December 1 high print at $2.42 Tuesday before dropping 8 cents. The weekly charts aren’t as favorable for the gasoline bulls as they are for distillates, with a rather significant-looking layer of chart resistance set up in the $2.50 range.

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