It’s been a rough start to October for energy markets with heavy selling Monday followed up with more losses so far today. RBOB futures are trading lower for a 6th straight session, ULSD is down for a 4th, and WTI is now testing the $50 mark heading in the wrong direction if you’ve been betting on higher prices.
Spot gasoline prices in both the US Gulf Coast and the NY Harbor both dropped below pre-Harvey levels for the first time this week. We’ll get the best look at how the refinery recovery is coming along in the API and DOE reports due out over the next 26 hours, but at the moment, both fundamental and technical factors are suggesting there’s plenty of room for gasoline prices to continue their decline.
While gasoline prices took the lead for much of September, diesel futures are taking charge this morning as both ULSD and European Gasoil contracts drag the rest of the complex lower. This relative weakness could be driven by liquidation in the large speculative positions held in diesel contracts on both sides of the pond. Like gasoline, charts for diesel futures are looking very weak, with a critical test coming this week in the low $1.70s, which is likely to determine whether or not we see another 10 cent drop in October.
Warren Buffett is buying a 38.6 % stake in Pilot Flying J this week, with a plan for Berkshire Hathaway to become the majority owner of the company by 2023. The Haslam family will retain control of the company through that point, and the headquarters will stay in Knoxville.
There is another potential tropical threat, currently given a 30% chance of developing into a storm over the weekend in the Gulf of Mexico. Unlike the September storms that formed in the Atlantic and moved West towards the US, this system is coming north from Central America. Water temperatures in the Gulf of Mexico and Caribbean are still above average for this time of year and will still support tropical development for several more weeks.
Ethanol RINs seem to have found a temporary floor, rebounding back above the $.70 mark Monday, as doubts about the implementation of two ideas that would reduce the burden on obligated parties under the Renewable Fuel Standard set in. Similar to what we saw earlier in the year, there’s a difference between what the EPA can propose and what the courts will allow to happen unless congress changes the RFS.