Energy Futures Retreat Slightly as Recovery Rally Sparks Debate Over Price Floor

Energy futures are seeing a modest pullback to start Tuesday’s session, after a strong 2.5-day rally added 22 cents to gasoline prices and 23 for diesel. The debate over whether we saw a price floor last Thursday or if we’re in the middle of a dead cat bounce continues and probably won’t be answered until we see prices move another 20 cents in either direction.   

The recovery rally may spoil the celebration for retail diesel prices dropping below a $4/gallon average for the first time since Russia invaded Ukraine, which will offer much needed relief to many consumers and businesses, although the decline in demand that’s gone with it is causing plenty of concern on its own.

The correlation between daily price moves in energy, commodity, and currency markets that had strengthened through the spring has fallen apart once again, with each asset class seeming to go its own way over the past several weeks, while volatility remains relatively low.

Another day, another refinery fire, this time the Delek facility in El Dorado AR, which saw a heavy oil tank go up in flames after a lightning strike. No injuries were reported, and the location of the fire suggests minimal impact to operations.

Texas is celebrating a new refinery opening this week, as Tesla breaks ground on a Lithium processing facility. Meanwhile, the Dallas Fed published a Q&A about the energy transition that explains why the attempt to electrify the US fleet will take much longer than many are expecting.

The EIA will release its monthly outlook for fuel supply and prices later this morning, with many expecting downward revisions to earlier forecasts after prices reached new lows for the year last week. 

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