ULSD Futures Touched A Fresh 15 Month Low Overnight

Energy prices are attempting to carve out a floor this morning with modest gains after ULSD futures touched a fresh 15 month low overnight. Early gains were hanging around a penny for refined products, but got an extra push higher following the Q2 GDP report that estimated 3% growth in the quarter, which outpaced many estimates. Since the FED has already all-but-guaranteed the start of rate cuts in September, that good news can be seen simply as good news for the domestic market.

Natural gas markets saw a jump overnight after the Freeport LNG facility had to take 3 of its trains offline following an upset, which has the potential to slow down LNG exports and could have some potential spillover effects on increased diesel demand if restart efforts today are unsuccessful.

Traders seemed to shrug off some strong demand readings from the DOE’s weekly report Wednesday, as increased refinery runs and healthy import figures offered more reminders of the excess supply capacity cushion in the US and most of the world.

The switch to winter-grade RBOB specs along the Gulf Coast opened the arbitrage window to ship barrels to the East Coast, and Colonial’s line 1 values rallied back into positive territory immediately, after spending all of August in negative figures. While containment challenges during the winter gasoline season often drive line space to a premium, it’s worth noting that PADD 3 gasoline inventories dropped to a 2.5 year low last week, which may limit the demand for shipping north, and leaves the area susceptible to any potential storms that may pop up in the coming weeks.

While gasoline prices are looking at the potential of multi-year lows, ethanol prices have been rallying following reports of no-so-wild-fires damaging Brazil’s sugarcane crop. Multiple arrests have been made in suspected arson that damaged thousands of acres. The ethanol rally may prove short-lived however as the fire damage but could actually drive more ethanol as producers shift to make fuel with the parts of the crop that won’t make food-grade quality. As it stands today, the US gasoline premium to ethanol has fallen to its lowest level of the year, and will discourage those with hopes of blending more than 10%.

The EIA this morning highlighted the drop in gasoline prices heading into Labor Day, citing sluggish demand and excess production capacity for the lower values, while also reminding us why so many people have moved from California to Texas in recent years. The report also includes a forecast from the EIA that despite US gasoline demand moving lower for most of the year, the agency expects holiday demand this week to be above 2023 levels.

The storm system moving across the Atlantic is now given 40% odds of being named while you’re trying to relax over the long weekend, and its potential path means it could become a threat to the Gulf Coast. Many people are noting how early forecasts for a very busy Atlantic hurricane season and below average Pacific season have been totally wrong in both regards, while forecasters continue to suggest that September may be very busy, which of course is no surprise as it’s always the busiest month for storms in the Atlantic.

Apparently they like going to the beach too. Houthi rebels are reportedly allowing salvage ships to attend to the oil tanker that’s on fire and leaking oil off their shores after a missile attack last week.