Stock Markets And Energy Prices Moving Higher This Morning

Stock markets and energy prices are both moving higher this morning following more reports that China is relaxing its COVID restrictions which would – theoretically at least – get the world’s 2nd largest economy back in growth mode.  October’s Jobs report is due out in a few minutes, but with the FED already making it clear that a pivot isn’t coming soon this week, that report may have less influence than normal. 

Correlations between energy and equity and currency markets have been fairly weak recently, but particularly for RBOB gasoline prices, they’ve been getting noticeably stronger over the past several sessions, and that news at least in part is contributing to the 9-cent gains in gasoline in the early going.

Reverse Cannon Ball run?  Diesel prices in LA are $1.40/gallon below those in New York today as diesel calendar spreads surged again Thursday and NYH premiums spiked north of 90 cents/gallon, while LA spots continue to wither.  NYH remains the outlier, trading at least 60 cents above all other US cash markets today, which should continue drawing barrels from far and wide, with strained capacity on pipelines, rail, trucks and vessels, steep backwardation, weather delays, and stiff competition from Europe being the only 7 limiting factors in resupplying the region.

California reported that diesel production in the state surged to a 2-year high last week, which was foreshadowed by basis prices for ULSD plummeting to a 50-cent discount to December futures earlier this week. Gasoline output went the opposite direction, with a large decline on the week, which was also foreshadowed by a rally in CARBOB basis values to a 60+ cent premium to futures.

Valero’s 290 mb/day refinery in Corpus Christi had multiple operating units shut by a fire Thursday, which was contained onsite without any injuries. While it’s unclear exactly which units were closed, or how long they may be offline, the Gulf Coast spot market seemed to shrug off the news, suggesting that event may either have minimal impact on operations or traders are just waiting to see how quickly restart commences.

The 180 million barrel sale of oil from the US Strategic Petroleum Reserve concluded Thursday, with the final 15 million barrels – which were announced last month as if they were a new release in a sign of the straw grasping taking place to deal with high energy prices – auctioned off, with deliveries scheduled in December.  It’s hard to argue that those sales of roughly 1 million barrels daily into the global market didn’t help cool down oil prices, but the question remains whether or not depleting half of the reserves will come back to bite us. 

The storm formerly known as Hurricane Lisa has made it into the Gulf of Mexico, but forecasts suggest the storm will not be able to regain its strength and rotation thanks to heavy wind shear in the area, which means the Gulf Coast refinery network may have dodged another bullet.   Meanwhile, Hurricane Martin is moving through the North Atlantic and is expected to weaken as it moves over that cold water, but still could bring damaging winds and rain to the UK.  2 other systems are still being tracked off of the SE US but given low odds of development.

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