Diesel Prices Look Like They May Have Lost The Tug Of War Contest This Week

Diesel prices look like they may have lost the tug of war contest this week as the energy market is limping into the weekend with nickel losses for refined products. It’s been a volatile week for all sorts of markets around the world, with recession fears and central bank action weighing heavily on demand forecasts, while the Nord Stream Sabotage, numerous global refinery issues and potential OPEC cuts next week weighing on supply.  

October ULSD and RBOB futures expire today, so for the NYH and Group 3 regions that haven’t already switched to the November reference month, make sure you’re watching the HOX and RBX contracts for direction today.

California gasoline basis values for the prompt delivery cycles didn’t move Thursday as apparently no one was desperate enough to pay $2.45/gallon over November futures to get supplies, and no sellers were willing to start off the inevitable price crash by making a lower offer. Diesel prices in the state continued moving higher however with some prompt markets moving to 50 cent premiums over November futures.

Hurricane Ian devastated parts of Florida, and is now heading for Charleston as a category 1 storm, but looks like it has spared energy infrastructure so far. Terminals in Tampa and Jacksonville reopened Thursday, and while dangerous road conditions will limit fuel deliveries for a while, it really is a remarkable story that fuel supplies were able to return so quickly when Tuesday morning it appeared that Tampa may take a direct hit and those terminals could be wiped out.  

The Port of Charleston is now in the path of Ian, but the current models show the storm’s eye moving north and east of those terminals, which should help limit the damage just as we saw in Tampa since the rotation of the storm will push water out and not in, which may prove critical since landfall is scheduled right around high tide. Some terminals in the region have reduced allocations ahead of the latest landfall, but since most of the state is supplied from inland sources via Colonial pipeline anyway, the odds of a lasting disruption to supplies is low even if there is damage to the waterborne terminals.  

There is another potential storm system moving off the coast of Africa today that’s given 50% odds of developing next week by the NHC. The location of that system would give it a chance to make it to the US if it develops. 

Exxon sent a letter to the White House trying to explain why limiting fuel exports won’t help increase inventories along the East Coast when the pipelines are already full and Jones Act qualified tankers are maxed out.   

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