Energy Markets Are Rallying For A 2nd Day After Reaching Multi-Month Lows Earlier In The Week

Energy markets are rallying for a 2nd day after reaching multi-month lows earlier in the week. While the bounce is relatively modest so far, it may prove pivotal in avoiding a technical collapse that could have pushed refined product futures below the $2 mark.

Two weeks in to Ukraine’s surprise invasion of Russian territory, and one potential strategy is beginning to emerge. Ukrainian forces now reportedly control’s the town of Sudzha, a strategic hub for the last pipeline flows of natural gas to eastern Europe. Control of that pipeline metering station gives Ukraine another bargaining chip with Moscow, if the two ever decide to bargain with chips instead of bullets. This new strategy by Ukraine perhaps also gives further clarity on the decision to blow up the Nord Stream pipeline which has been a mystery until recent reports detailed those events.

European natural gas prices have risen in recent weeks, but pulled back in the past few days, so it’s hard to pin this latest bounce in diesel prices on the potential need for fuel switching ahead of winter, at least so far.

A Reuters article Thursday highlighted how the Canadian rail strike is impacting various industries in the US, while noting that oil and refined products will only see minimal impact due to the pipeline capacity that accounts for around 99% of Canadian petroleum exports. In some limited cases, diesel demand near the border may actually increase as long haul truckers are called on to replace some of the lost rail capacity, but impacts are expected to be short-lived after the Canadian government intervened and ordered binding arbitration to break the stalemate.

The Atlantic basin has been quiet since Hurricane Debby struck Florida 3 weeks ago, and the NHC predicts no development of storms over the next week, a gift to traders hoping to do something besides watch the weather over Labor day weekend. Forecasters are still calling for an extremely busy year for storm activity, and the peak of the season is still 3 weeks away, so don’t be surprised to start seeing multiple named systems stacking up in the coming weeks.

Today’s take on socialism in energy markets: The presentation from California’s graduate student project on theoretical gasoline supply reliability that may soon become law can be seen here.

In a nice bit of unintentional comedy, the presentation includes a graphic showing similar efforts made by the state to control prices in the year 2000, back when they were roughly 1/3 of today’s values. No mention was made in the presentation why those plans failed so miserably. The presentations also make no mention of the limiting factors of its boutique CARB fuel specs.