Energy Prices Modestly Higher to Start Tuesday, EIA's STEO Imminent

The choppy action continues with energy prices seeing modest gains to start Tuesday’s trading, after a back-and-forth session Monday ended with small losses. 

ULSD futures did manage to set a new 3-month high intra-day Monday, and are holding near those levels this morning, so could be poised for a small technical break out to the upside if they can get north of $2.60. WTI is also hovering near the top end of its summer trading range, which could help make the case for stronger diesel prices ahead, even though gasoline prices are lagging as 2 of the big 3 summer driving holidays are now in the rear-view mirror.  

Later this morning we’ll see the EIA’s monthly energy outlook with updated price and supply forecasts for the year.  Yesterday the agency highlighted how biofuels are displacing distillates on the West Coast due to the rapid influx of Renewable Diesel coinciding with expanding environmental credit programs in California, Oregon and Washington.  A recent article from McKinsey highlights the challenges faced by refiners looking to convert units to product more RD and SAF, and projects that the rapid increase in biofuel production is about to plateau. 

California spot markets continue to be the highest in the nation, even before adding on the highest taxes & environmental fees of any state, after another unplanned refinery hiccup in the LA area Monday. The Midwest is facing the opposite problem these days, with spot markets already pricing in big discounts for distillates and a Detroit refinery requesting permission to increase production to full capacity that will add to the oversupply if approved. 

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