RBOB Gasoline Futures Touched Their Lowest Level Of The Year Overnight While ULSD And Crude Oil Prices Hit 3-Month Lows

RBOB gasoline futures touched their lowest level of the year overnight while ULSD and crude oil prices hit 3-month lows. A combination of weak technical factors and demand concerns seem to be driving the move lower, even as stock markets continue their recent run higher on hopes that the interest rate hikes are finished. A stronger dollar is also getting credit for the slide in energy prices by some media outlets, even though the correlation between the asset classes has actually been positive over the past 30 days.

The last time we saw ULSD test its 200-day moving average, just over a month ago, prices bottomed out at $2.83 and rallied 42 cents over the next 10 days. This time, that support layer offered little more than a speed bump on the move lower, and a technical trapdoor seems to have opened once the descending triangle pattern was completed. Longer term, the charts suggest this breakdown could send prices back below $2.50 where we saw them bottom out last spring, although near term the contracts are begging for a corrective bounce after prices dropped 27 cents from Friday’s high.

RBOB seems to be facing a similar test around the $2.15 range today, but so far are managing to hold just above that level, which looks like the pivot point on the charts that will determine whether or not gasoline futures make a run at sub $2 levels by year end. Note that Gulf Coast spot values for gasoline are already trading below the $2 mark, and the big spread between Gulf and East coast values has values for Colonial pipeline space holding north of $.10/gallon.

Buying it, not buying it:  While the big drop in diesel futures is capturing the headlines, 2 of the country’s more volatile spot markets are seeing basis values rally sharply to keep cash prices moving higher this week. Chicago ULSD Basis had gone from worst to first in November with a 50-cent rally from a 30-cent discount to a 20-cent premium following a pair of rumored-but-unconfirmed refinery upsets in Illinois. Not to be outdone however, LA CARB diesel basis jumped to a 30-cent premium this week, following October’s 60 cent collapse. LA CARBOB basis values also rallied, and local allocations have been restricted suggesting a local refinery had a disruption although nothing yet has been reported to the AQMD. Meanwhile, Chevron’s El Segundo refinery in LA was reported to start up its new either-or Hydro treater unit that will allow the facility to produce either traditional or renewable diesel, expanding that plant’s co-processing capacity. 

The API reported a huge build in crude oil stocks last week above 11 million barrels, while distillates increase by 1 million barrels, and gasoline stocks dropped by 400,000. The EIA’s weekly status report will not be released this week due to a system upgrade. You might keep an eye on futures at the 9:30am Eastern time anyway just to see if any trading programs weren’t updated and still try to react to the non-existent report.

Go ahead and take a few weeks off: Accuweather forecasters declared an end to the Atlantic Hurricane season 3 weeks early, saying that the US won’t see any impacts from a storm this year. The season was quite active, and several huge storms formed, but most of the country – and the energy supply network – avoided any major issues thanks to favorable steering currents that kept most of the storms off-shore and out of the Gulf of Mexico.  

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