Diesel Futures Slide For Third Day Amid Geopolitical Tensions And Refinery Setbacks

Diesel futures are leading the energy complex lower for a 3rd straight day after reaching multi-month highs earlier this week. At current levels, diesel futures would snap a 4 week string of gains that added 60 cents/gallon from the October lows.

NYMEX ULSD futures appear to be chasing the ICE European Gasoil contract again, which dropped 5% overnight before cutting those losses in half this morning. The December ULSD contract hit an overnight low of $2.4418, a 27 cent drop from Wednesday’s high.

The potential peace deal being floated by the U.S. to try and stop the war in Ukraine is getting credit in the headlines for the pullback even though the odds of it actually coming to fruition seem to be very low at this point. There’s also a feeling that Thursday’s big reversal lower in stocks may be creating another wave of “Risk Off” selling that could be spilling over into energy contracts as well.

India’s Reliance, which operates the world’s largest refinery, said it has stopped buying Russian oil to supply that facility effective Thursday due to U.S. sanctions against Russia’s Rosneft.

The U.S. Treasury expanded its sanctions targeting Iran’s “illicit” oil sales targeting numerous individuals, shipping companies and vessels on Thursday.

The DOE announced a re-org focused on “restoring American energy dominance” and “ensuring the safety and readiness of he Nation’s nuclear weapons stockpile.” The org chart accompanying the announcement makes it appear that former departments focused on cleaner fuels have gotten the axe, while a new group called the Office of Energy Dominance Financing (EDF) was created.

The 340mb/day Deer Park TX refinery that Pemex bought from Shell in 2022 (when Shell was firesaling assets during its ill-fated stint of pretending to go green) reported an upset in a coker unit at they attempted restart after planned maintenance. The unit was not successfully restarted and was placed in hot idle mode while repairs are made before another restart attempt can be made.