Gasoline Surges As Global Energy Risks Return

It’s a mixed start for energy futures this morning with all but the HO/ULSD contracts inching higher to start the day. The gasoline contract is leading the way, adding nearly 1% in pre-market trading, with the crude oil benchmarks, WTI and Brent, tagging along, trading just on the green side of yesterday’s settle. The selling in prompt month diesel contract may have more to do with profit taking in the calendar spread, as it’s seeing its first drop since the renewal of the shooting war across the Persian Gulf.

The June CPI data published yesterday morning brought relief on the inflation front, with the energy index sliding 5.7%, its largest monthly decline since April of 2020. Gasoline and diesel prices are largely responsible for the index slide, each dropping more than 9% on the month, following the easing of hostilities in the Middle East. Of course, as we now know, the pullback at the pump and the racks will be short-lived since the resumption of hostilities has pushed prices sharply higher so far this week.

The API reported yet another drawdown in refined product inventories last week, estimating gasoline stocks to drop by 1.7 million barrels, while 73,000 barrels pull from national distillate inventories. The Institute estimates crude oil levels to decrease by just over half a million barrels on the week. The EIA’s weekly report is due out at its normal time this morning.

Ukraine has continued pummeling Russian energy infrastructure this month, and remains on pace to match the numbers of refineries hit in June, when it set a monthly record at 13. The effects of Ukraine’s ballistic sanctions against Moscow are evident in the diesel export ban Russia enacted back on July 8th, scheduled to last at least until July 31st, and the Ukrainian Intelligence reports of India supplying Russia with fuel, in a reversal of the normal energy flow between the two nations.