Energy Prices Starting July With A BANG

Just when it looked like energy prices were collapsing at the end of June, they start July off with a bang and move sharply higher.   ULSD prices are leading the move higher this morning, up 17 cents and trading back above the $4 mark.  There’s not a smoking gun headline to pin the rally on, so it could be more about money flows from funds to end one quarter and start another than anything that’s changed the fundamental outlook of tight global supplies vs expectation of slowing demand…even though the US is expected to break travel records this weekend. 

The big sell-off to end the first half of 2022 trading did leave refined products in rally-or-else status on the charts, with the $4 mark for ULSD and $3.65 for RBOB looking like pivotal levels to determine direction for the coming weeks.  If this rally fails to hold, there could be much lower prices ahead, but if prices can climb back above the bullish trend lines then this week’s sell-off looks like a bear trap.

Russia is now doing its best Venezuela impression in the latest move in the ongoing global energy chess match, seizing control of the giant Sakhalin oil and gas project and forcing the international investors (who weren’t already leaving) out.  That project accounts for roughly 4% of global LNG, and will be a major blow to Japanese firms that rely heavily on Russian exports.

OPEC and Friends agreed to maintain their planned production quotas in their meeting yesterday, which really doesn’t mean much as the cartel’s actual output lags far behind their targets as their COVID-related output cuts officially come to an end.

The DOE continues to struggle with system issues and is still unable to publish some of its weekly reports as a result.  The agency was able to catch up on its weekly inventory stats Wednesday, and put out its Monthly Energy review yesterday, which is always exciting reading.

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