Energy And Equity Futures Are Moving Higher To Start Wednesday’s Session

Energy and equity futures are moving higher to start Wednesday’s session, with volumes dwindling ahead of the holidays and year end. 

ULSD prices are leading the way this morning, and are up 15 cents since bottoming out just below the $3 mark Tuesday, which in ordinary years would be a big move, but in 2022 it’s actually below average for a 2-day price swing. The $2.80-$3.30 range established last week needs to be broken near term before diesel prices can find a trend, and any movement inside of that range is probably just noise. If you’re looking for cheap diesel, head to the Chicago region as prompt prices there have plummeted 60 cents below futures as the winter demand doldrums set in, and few options remain to move product out of the area as December trading grinds to a halt. 

The move higher in product futures so far seems to be shrugging off the API reporting more inventory builds last week with gasoline stocks adding 4.5 million barrels and distillates adding 830,000. That doesn’t stop headline writers from crediting today’s rally on a decline in crude oil stocks of 3 million barrels, and it’s hard to blame them given the lack of news this week.

Speaking of which, the EIA is in its end of year hibernation period, and is republishing articles for its “Today in Energy” segment. Today’s note highlighted that gasoline demand increased in 2021 and wins the captain obvious award of the week. The agency is still scheduled to publish its weekly stats at its normal time this morning.

P66 has reportedly sold its terminal formerly known as the Alliance refinery that has been shuttered since being knocked offline by Hurricane Ida in 2021. The sale seems to cement the idea that the plant will never again operate as a refinery given the buyer’s status as a pipeline and terminal operator. 

Temperatures in the refining hubs stretching from Corpus Christi to New Orleans, which account for more than half of the total US refining capacity, are expected to drop well below freezing Thursday night, with gale warnings also in place for the region. That combination of cold and wind will no doubt lead to some power outages, so the chance of operational disruptions is real, and it wouldn’t be surprising to see some plants initiate a planned shut down today to avoid an unplanned one tomorrow. We probably won’t know until Friday or Saturday if there is any meaningful production outages as a result, and since the market is closed Monday, we may not see a price reaction – if there is one – until Tuesday.

The threat of cyber-attacks on energy infrastructure have become an afterthought recently, but reports this morning suggest Russian hackers attempted to compromise a “large petroleum company within a NATO member nation” in August. While the reports are sketchy at best at this point, the come on the heels of warnings from Norway and other countries of the vulnerabilities to energy infrastructure, and it’s worth remembering that it was less than 2 years ago that Russian hackers knocked the Colonial pipeline offline. Meanwhile, Russia is having refinery problems of their own with multiple fires reported at facilities in Siberia in the past week, sparking rumors of sabotage.

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