Energy Futures Bounce, More Buying Needed To Shed Dead Cat Suspicions

Energy prices are bouncing after ULSD prices touched a new 17-month low Thursday, and RBOB futures fell to within 2 cents of their lows for the year.  Both gasoline and diesel prices are up more than 13 cents from Thursday’s lows, but will need to add at least another nickel to make this bounce feel sustainable. 

Charts suggest that RBOB futures may have fulfilled their drop after breaking their weekly trend line, but also hint that we could see ULSD make another run at the $2 mark before finding a longer-term floor.

Good news is bad news? The BLS reported 243,000 new jobs were added in the US during April and the unemployment rates (whichever one you prefer) declined to their lowest levels in decades. Energy and equity markets both saw a small pullback in their overnight rally after that report as it seems to have some trading programs thinking that the strong labor market may force the FED to rethink their foreshadowed pause in interest rate hikes. Prices recovered soon after the report’s release as the agency also revised its estimates for February and March down by a combined 149,000 jobs, which largely negated April’s better-than-predicted increase. 

Coming back to earth? Prices across the Southwest are showing signs of easing, after holding at huge premiums to spot markets for the past 2 months. Suppliers that had been severely restricting allocations since March are now opening them back up, which suggests we might see those price spreads collapse next week.

Colonial line space values for gasoline have dropped sharply the past couple of days, as a rally in Gulf Coast basis values has caused the gap between NYH and Gulf Coast prices to shrink.

Click here to download a PDF of today's TACenergy Market Talk.