How Long Will It Last?

How long will it last? That seems to be the question of the day, whether in regards to the virus, shelter-in-place orders, or the recovery rally in stocks and energy prices after the DJIA had its best percentage gain in 87 years Tuesday.

Unfortunately, so far this morning it seems like the answer to the recovery rally is not very long as both stocks and energy futures have given back most of their overnight gains and several contracts are now moving lower. RBOB gasoline futures are holding to modest gains in the April and May contract, although remain well off their intra-day highs from Tuesday’s session.

From a short term technical perspective, this overnight pullback is looking bearish for energy futures as prices were unable to break the downward sloping trend-line that’s been in place since the March 9 price plunge. With fundamental supply/demand issues still just a guessing game, if those technical resistance layers aren’t breached this week, there’s a good chance we’ll see another round of heavy selling soon.

Worth noting in the political drama playing out in Washington: One of the sticking points in the stimulus package is the attempt to tie cleaner jet fuel requirements to any bailouts of the airline industry.

Speaking of Jet Fuel, the EPA is reportedly considering allowing temporary waivers to allow jet fuel to be blended with other lower-sulfur diesel grades to help the industry alleviate a glut of the suddenly unwanted product. The EPA is also considering a waiver or delay of the summer RVP requirements for gasoline, as winter grade inventories are piling up and may not be transitioned in time.

Following moves at numerous petroleum refineries this week, ethanol production facilities are announcing numerous cut backs to offset the plunge in ethanol-blended gasoline demand. On the bright side, as predicted, some ethanol producers (along with other alcohol distillers) are temporarily ramping up production of sanitizers instead of their normal products.

The API reported inventory draws across the board last week with Crude stocks down 1.2 million barrels, gasoline down 2.6 million barrels and distillates down 1.9 million barrels. The DOE’s weekly status report is due out at its normal time today, and the agency has not yet indicated that reporting would be delayed in the future due to the change in employees working remotely.

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