Sharp increases in oil production, interest rates, and fear over the past couple of weeks have led to the sharpest selloff in equity and energy markets that we’ve seen in several years. Oil & refined products are all trading lower for a 6th straight day, and the charts suggest there’s still another 3-5% to go before we reach longer term support.
Before this week, the DJIA had never settled down more than 1,000 points in a day, and now it’s happened twice in 4 days. Yesterday’s tumble left most major stock indices in “correction territory” having dropped 10% or more over the past 2 weeks. Energy futures haven’t been nearly as volatile intraday as equities have been, but nevertheless they’ve ended up in about the same place.
While the 10% threshold for a correction may be an arbitrary numbers more valuable for headlines than for traders, it’s important to step back and realize that despite the swirling fears, this is just still a correction. The bad news if you’re hoping for higher energy or equity prices, is that there’s still another 10% to fall before this would be considered a bear market.
RIN values rallied to their highest levels in a month Thursday as the spending bill passed by congress appears to have left out the $1/gallon biodiesel blender credit for 2018. Biodiesel RIN values rallied more than 7 cents on the news, while ethanol RINs were up more than 6 cents as less biodiesel blending would mean less potential for supplementing the total renewable fuel requirement in the RFS. The bill that was passed overnight, ending another brief government “shutdown” is also expected to reinstate the federal oil spill fee that expired December 31st.