Petroleum Futures Climb On Tariff Headlines, Storm Watch And Strong Diesel Demand

Petroleum futures are drifting higher this morning with the prompt month HO contract leading the way, trading .85% over yesterday’s settlement in pre-market trading. While the prospect of the US doubling its tariffs on India is taking credit for the nominal gains this morning, that cost increase isn’t scheduled to go into effect for another 3 weeks. That leaves plenty of time for negotiations and possibly the replacement of the problematic Russian crude oil being bought by India with barrels from OPEC.

The disturbance off the Carolinas’ coasts has shifted further Eastward and has been given a lower chance (30%) of cyclonic development over the next week. With that are looking much less threatening, all eyes are now on the system moving across the Atlantic with a 60% chance of organizing into a storm before reaching Bermuda next week. Colorado State University published their mid-season prediction yesterday, maintaining their initial forecast of a busier-than-usual Atlantic hurricane season.

The EIA published a note this morning on the volatility in energy markets last quarter, highlighting how oil prices were whipsawed as traders digested global economic concerns, geopolitical tensions in the Middle East, and the ongoing Russia-Ukraine war. The Administration also noted the general refinery margins stuck close to their 5-year average over the past 3 months, with diesel outpacing its gasoline counterpart due to strong demand in Europe and supply concerns due to the aforementioned wars in the region.

From yesterday’s DOE report:

Crude stocks dropped 3mm barrels on increased exports and refinery runs. Runs were up across all PADDs with each sitting at or above the high end of their seasonal 5-year ranges, except for PADD 1 where rates are steadily climbing back up after the Bayway upset a few weeks ago. The utilization rate rose to a level not seen since 2018; partly aided by the 71kbd capacity drop in PADD 4 reported three weeks ago that added an immediate ~19% utilization boost in the region while run rates there continue to climb despite that loss in capacity.

Diesel stocks drew slightly on a big drop in imports at the same time exports shot up, along with another week of increased demand. Inventories were mixed for a tame overall decrease but saw larger changes at the PADD level. PADDs 1 & 2 each added over 1mm barrels and moved back into the bottom end of their 5-year ranges. PADD 3 wiped out those increases with an almost 3mm barrel drop, leaving stocks closer to the low end of the range after hitting a 2025 high the week prior. Traditional diesel in PADD 5 was little changed but updated renewable diesel readings from May published last week showing the first increase of the year, pushing total PADD 5 diesel above average for the first time since March.

Gas stocks fell with imports dropping below their seasonal 5-year range as exports held above average, but the draw was partially offset by a decrease in demand. PADDs 1-3 accounted for the decline while PADDs 4 & 5 increased. PADD 2 typically sees a seasonal slide in gas inventories starting in the spring but this year has been tracking just below 2024 levels since May and dropped below its 5-year range last week. PADD 5 on the other hand has recovered from spending the majority of the year under its 5-year range and is currently at a seasonal 5-year high.