FED Signals That Days Of Money Printing May Eventually End

A big rally in the US Dollar after the FED signaled that the days of money printing may eventually end has become the big story this week that has sent a wave of “Risk Off” selling pressure across numerous markets.  The selling this week sets up a pivotal test for energy futures in the back half of the month.  If they can hold on around current levels and find a bid, the longer term upward trends are still intact, but if they drop another couple percent from here that opens the door on the charts for a 20-30 cent drop for products this summer.

Commodities in general have been under heavy selling pressure this week, with several wiping out their entire 2021 gains as supply chains start to catch up to the rapid swings in demand.  While crude oil has managed to buck that trend so far, WTI is now giving up its gains for the week and may struggle to resist the pull of refined products and other commodities if the dollar rally continues.   The selloff in corn & soybeans has added to the downward pressure in RINs that wiped out a third of their value in just 4 days.  We did see values reach a temporary floor in Thursday’s session, but sellers moved offers lower in the afternoon suggesting the move lower may not yet be done.

It was a Reuters report that kicked off the huge sell-off in RINs one week ago, and a new report highlights the large obligations refiners have outstanding as of their Q1 earnings filings.  While this week’s sell-off no doubt has many refiners breathing a little easier as Renewable Volume Obligation (RVO) values dropped to $.16/gallon of transportation fuel produced from $.23, prices are only back to where they ended the 1st quarter, so from a value standpoint, those refiners are no better off now than they were as of those reports.    

Tropical Storm Claudette is expected to be named later today before making landfall in Louisiana overnight.  The storm’s current path suggests it won’t make a direct hit to any of the numerous refineries in the area, but will dump heavy rains on an area that’s already been saturated this year, and is plenty weary of hurricanes from the parade of storms that hit them last year. 

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