Diesel Is Winning The Price Tug Of War So Far This Week

Diesel is winning the price tug of war so far this week, rallying 75 cents from the lows set August 8th while gasoline prices continue to stumble pushing the premium for ULSD vs RBOB to 98 cents/gallon this morning.

New York harbor spot gasoline prices have been leading the slide lower, completing their return trip to reality after starting August trading 50 cents above futures and 70 cents above some regional counterparts. That easing can also be seen in the September/October (U/V) RBOB spread which has plummeted as resupplies by pipe, boat and truck raced to take advantage of the huge arbitrage opportunity before the transition to winter grade fuels starts next month.

The forward curve charts below demonstrate the changing opinions in the market over the past month. Crude oil and gasoline prices are lower than a month ago at the front of the curve, suggesting that fears of supply shortages have eased, while prices further forward have been increasing, which suggests that the fears of a recession have been declining as well. Diesel is the exception to that trend, with prices across the curve up from month ago and week ago levels, as solutions to the shortage of distillates (in some parts aided by the shortage in natural gas) are few and far between and whatever economic slowdown is expected isn’t big enough at this point to push diesel prices lower.

Two more potential storm threats are being tracked by the NHC, although both are given low 20% odds of developing. We’re in the Cabo Verde portion of the Hurricane season now, so we can expect new potential systems every few days for the next 3-4 weeks, and will just have to wait and see which become major hurricanes.   

Today’s interesting read from Rystad Energy: Why Russian oil production has bounced back this summer, and why it will drop again this fall. 

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