March Trading Is Going Out Like A Lamb As Energy Prices Continue To Search For Direction

March trading is going out like a lamb as energy prices continue to search for direction with Bears focused on soft demand and fears of a recession, while the Bulls can see supply shortages and the risk of disruption lurking around the corner. 

While March felt chaotic with a new banking crisis and plenty of other domestic and geopolitical controversy going on around us, it was actually a relatively tame month for refined product futures. The trading range for diesel in March was actually the smallest we’ve seen since before the war broke out and was just ¼ of the range we saw in March a year ago. 

Protesters in France agreed to extend refinery strikes through April 4th, which is keeping close to 1 million barrels/day of refining capacity offline.  A Business Wire note this morning highlighted how these strikes may be rapidly depleting the stockpiles built up ahead of February’s sanctions that banned Russian diesel imports.   

The Dallas FED confirmed what we’ve been seeing in the weekly rig counts, showing that activity in the energy sector has stalled out in the first quarter of 2023. Executives surveyed lowered their Crude oil price outlook for the end of the year by $4/barrel from the previous survey but made a much larger change to expectations on Natural Gas prices, slashing those estimates by nearly 40% since Q4.

As if banks don’t have enough on their plate these days: There were reports this week that Wells Fargo is looking to expand its energy trading business. There are also reports that Wells Fargo was fined nearly $100 million for sanctions violations, is under investigation by the CFTC for illegal trading communications, and that a former executive is facing jail time for obstructing the investigation that ended up with the bank paying more than $3 billion in fines for opening fake accounts.  

You may also remember that after the last round of bank bailouts in 2008, the FED moved to make the banks act like banks and not trading houses, which eventually led Morgan Stanley to try and sell their oil trading business to the Russians, only to end up selling it to a firm headed up by a former Enron trader when the Russian deal was nixed by regulators.  You can’t make this stuff up.

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