Energy Prices Tick Higher Amid Easing Tanker Risks and Collapsing Time Spreads

Energy markets are ticking modestly higher to start Tuesday’s trading, after the largest 1-day rally for crude oil prices in 2 months to start the week. We’ve managed to go almost 12 hours without reports of an oil tanker either being attacked by drones, or seized by the U.S., so that appears to be giving traders a chance to catch their breath as liquidity begins to try up ahead of Christmas.

ULSD futures are leading the move this morning, up nearly 2 cents after trading near breakeven most of the night. The January ULSD contract is up more than a nickel in the past 2 sessions and has added more than 6 cents from the lows set Friday.

Basis differentials have also been moving higher the past few sessions as a collapse in time spreads has given physical traders a chance to buy barrels without taking a harsh hit on values from the backwardation that built for most of November. In the LA spot market, prompt diesel diffs are up almost 12 cents in the past 4 days, while the discounts for RD remain wide as some producers race to beat the potential changes to credit values in the new year.

After a 7 session losing streak that knocked 16 cents off of prompt values and pushed prices towards a 5 year low, RBOB gasoline futures are trading higher for a 5th straight day today and are up nearly 7 cents from the lows set last week.

A Reuters article Monday suggests that China’s oil stockpiling, not OPEC, will be the key fundamental driver of prices in the coming year with roughly 1 million barrels/day going into the country’s reserves.

The White House announced that Christmas Eve and December 26 would both be federal holidays this year. No, you don’t get 2 more days off. The EIA’s weekly status report won’t be published this week due to the new holiday and will instead be published on Monday December 29th at 10:30 eastern.

The Federal Oil Spill Liability Trust Fund tax is set to expire on 12/31, and so far it appears that there is no pending legislation set to extend that tax so it should fall off of your fuel invoices January 1. It is possible that congress reinstates the tax as part of a broader package later at some point in the new year.

The first 3rd quarter GDP estimate came in at 4.3%, the highest published in 2 years, with consumer spending and a drop in imports the main contributors to the increase.

The new gamble: The CME group is joining forces with a sports betting group to offer “prediction markets” in what appears to be an effort to regain market share lost when online gamblers shifted to things like crypto instead of traditional commodities like oil.