The Bulls Look Like They’ve Regained Control Of The Energy Markets Temporarily

The bulls look like they’ve regained control of the energy markets temporarily, with ULSD once again leading the push higher for what will be a 9th straight week of gains if prices can hold above $3.16 today. June 23rd marked the last week when ULSD finished lower, settling at $2.4071 that Friday, vs $3.2005 this morning. Anyone looking for a reason that this might finally be the end of diesel’s summer rally may point to the fact that despite the higher weekly settlements, ULSD prices have not yet broken the high trade of $3.2310 set August 10th.

RBOB futures are up almost a dime from Wednesday’s low but still need to add a couple more cents if they’re to avoid their 2nd straight weekly decline. There are just 5 trading days left in the September RBOB contract which marks the last summer grade spec contract of the year and with October RBOB trading 20 cents lower, this may be the bulls last chance to stage a meaningful run at $3 this year.

The strength in energy futures came despite a big reversal lower in US equity markets Thursday just in time for the FED Chairman’s speech this morning that many think will show that the central bank is still not done with its inflation fighting rate increases. After moving in lockstep earlier this summer, the correlation between daily price moves in energy and equity markets has gone negative in the past 2 weeks. 

The NHC is still tracking 4 storm systems in the Atlantic this week, although none look to be a direct threat to the US. Tropical Storm Franklin is expected to reach Category 2 hurricane status next week as it moves north a few hundred miles off the East Coast, which will create some high seas and dangerous currents, but should not be a major factor on supply or demand. The other 3 systems are all given low (20-30%) odds of being named.

Startup troubles: The Cenovus (FKA Husky) refinery in Superior Wisconsin was evacuated for a 2nd straight day Thursday after a leak. No injuries or damage to the recently rebuilt facility were reported but it’s not helping the facilities reputation after it blew up 5 years ago and forced much of the town into an emergency evacuation to avoid toxic fumes.

Haven’t changed their mind: Despite selling multiple refineries in the US in the past few years, just before US refineries had record profits, Shell seems committed to its plans to reduce traditional refining capacity with reports that it will soon be offloading its 237,000 barrel/day plant in Singapore. With numerous new refineries trying to take control of the Asian markets, and a military looking to flex its muscle in the South China Sea, Sinopec’s interest in the facility will no doubt be a topic of much debate in the weeks to come.

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