Markets Around The World Limping Into The Weekend

Markets around the world are limping into the weekend after one of the most volatile weeks on record as traders and investors around the globe try to figure out how the trade wars will impact their industry and themselves. Energy markets were clinging to modest gains for most of the morning, but WTI and ULSD have now slipped just below break even for the day heading into the 8 o’clock hour.

As has been the case for most of the past couple of months, the moves in energy futures are following U.S. equity markets which are also pointing to a modestly higher open following another big drop Thursday.

The NY Harbor spot market is the last U.S. spot market left still trading a winter-spec gasoline for the season, and those values dropped close to $1.80/gallon Thursday April 10th, the lowest price since April 9th of 2021, when the country was still emerging from the COVID demand doldrums. The NYH spot market will flip to summer-grade timing next Thursday, and the winter/summer spreads are also trading at their lowest levels in 4 years and less than half of where they were this time last year.

The EIA slashed its forecast for energy prices in its tariff-chaos-delayed Short Term Energy Outlook, cutting Brent Crude’s estimated price by 10% due to the negative consequences of the trade wars. While the drops in oil and products are certainly note-worthy, the biggest loser in the trade wars is predicted to be propane which has seen an incredible surge in exports mainly to China in recent years as a feedstock in polypropylene production which are the building blocks of so many plastics and other polymer goods that are manufactured (very cheaply) in China. The EIA predicts a 40% drop in U.S. propane prices next year as supply won’t slow much as it’s a byproduct of oil and natural gas production, but demand will slow and lower prices will be the only solution to keep Chinese buyers on the hook.

The Keystone pipeline remains offline after a spill Tuesday in North Dakota leaked a reported 3,500 barrels into a farm field. Western Canadian oil prices traded down to the $48/barrel level this week, approaching the 4 year lows reached by U.S. crude and products, but the discount to WTI doesn’t seem to have been phased much by the event still hanging around a $12-13 barrel discount suggesting sellers aren’t too worried that the shutdown will last for long.

Today’s interesting read courtesy of the IEA: How AI is rapidly influencing energy demand, supply, and cyberattacks on the industry.