Ceasefire Failure in Gaza Driving Prices to Recover Monday's Losses

Energy markets saw a wave of heavy selling Monday following reports of a pending ceasefire agreement between Israel and Hezbollah. Prices are taking back some of those losses this morning as it becomes clear that the conflict in Gaza is still raging on, which means Red Sea shipping lanes will still be compromised, and Iran is still promising further retaliation.

Chicago diesel was the biggest loser Monday as the roll to December trading cycles combined with the heavy selling in futures to push cash prices down more than 15 cents on the day. A delayed restart at BP’s Whiting refinery last week had pushed Chicago-area values to the highest levels east of the Rockies, but now they find themselves back in a more familiar position of being among the cheapest in the country.

After trading down to a 2 month low Monday, RIN values have rallied 4 cents already Tuesday morning with bids standing at 62 cents/RIN for D4 and D6 contracts. The cause of that sudden reversal is unclear at this point, although it’s likely we’ll see headlines pertaining to the Small Refinery Exemption legal battle or some other potential change to the constantly changing regulations make their way across the news wires later in the day to explain the move.

The Dallas FED’s Texas Manufacturing survey released Monday showed a neutral to negative outlook for production activities in the state in November, erasing the optimism witnessed in October’s report. New orders and general conditions both held in negative territory for the month, suggesting continued contractions in the manufacturing sector, which is heavily reliant on energy production in the state.

Not going anywhere for a while? Reuters provides an update on the legal quagmire of the Citgo auction.

The EIA this morning highlighted the record monthly US Oil production in August at 13.4 million barrels/day on average, with a prediction that 2025 will set a new all-time high despite the slowdown in drilling activity.