With The DOE And FOMC Both On Tap, More Big Swings Appear Likely To Come

It’s already been a volatile day for energy prices, and with the DOE and FOMC both on tap, more big swings appear likely to come. 

The big news overnight was Russia announcing it would draft 300,000 reservists to aid its [failing] war in Ukraine. That move seemed to add to bullish sentiment in oil and refined product prices with ULSD up 12 cents not long after that news broke, only to see prices pull back and trade down 4 cents as of 7:30 central. Crude oil and gasoline prices have seen less dramatic versions of those price swings, and are still holding on to modest gains in the early going.

The API reported inventory builds across the board last week, with crude stocks up 1 million barrels (thanks again to large releases from the SPR) while gasoline stocks increased by 3.2 million barrels and distillates increased by 1.5 million. The DOE’s weekly report is due out at its normal time of 9:30 am central.

The FOMC announcement is due out at 1pm central, just 30 minutes ahead of the settlement for NYMEX contracts, which often makes for some wild trading to end the session. Just about everyone expects the FED will raise interest rates by at least 75 points today, with a large focus on what the chairman will say in the news conference following that announcement, which is likely to add to the volatility late in the day. 

Gasoline prices on the East and West coast continue heading in opposite directions. NYH gasoline prices have dropped to just even with RBOB futures, and hold just a 3 cent premium vs their USGC counterparts, which marks the lowest spread since the RVP transition in April. Colonial line 1 space was reported to trade at a negative 2 cent value yesterday, which marks the lowest value in 2 years, just a few short weeks after reaching an 8 year high.

While the East Coast is seeing gasoline values crumble, West Coast markets continue to hold premiums of $1/gallon or more as refinery issues and the end of the summer gasoline spec keep inventories at extremely low levels.     

Another refinery fire in the Midwest injured 2 employees, and has completely shut operations at the Toledo facility and will keep surrounding markets which have been unusually tight further on edge.  That fire is yet another black eye for Husky which is still rebuilding the refinery it blew up in Superior WI a few years ago.

There are 5 potential storm systems being tracked in the Atlantic basin today, which will probably mark the unofficial peak of activity for the 2022 season. Tropical storm Gaston

The most troubling at this point for energy supplies is the system known as 98L that is given 90% odds of being named (Hermine) in the next 5 days. Odds are good that this system will make it through the Caribbean and it could blow up to a major Hurricane once it reaches the extremely warm water East of the Yucatan, but are unclear where it will head once it reaches the Gulf of Mexico. The early favorite looks to be a Florida landfall, which would keep it east of the oil production and refining centers, but will not help the state’s fuel supplies that have been running low for the past 6 months.

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