Traders Managed To Turn A Blind Eye To A Bearish DOE Report Yesterday

WTI broke through $90/barrel for the first time since November overnight and ULSD reached a new 8-month high as the march higher for energy prices continues, even as near-term supply concerns seem to be easing. 

Traders managed to turn a blind eye to a bearish DOE report yesterday that showed healthy inventory builds across the board, soft demand and oil output that’s approaching record highs despite the big reduction in drilling rigs this year. Refiners continue to take advantage of the healthy margins, with total US output hitting its highest levels of the year, despite numerous disruptions that are keeping several plants from reaching their capacity. 

(See DOE charts below)

Good news on the storm front: Hurricane Lee’s path has shifted east in the past 24 hours, and it’s expected to drop to “only” tropical storm status earlier than previous forecasts, which should lessen the impacts on the New England coast and makes a direct hit on Canada’s largest refinery less likely, while Nova Scotia is now the odds-on favorite to take the landfall of this slow-moving storm. Shipping in the region will still be impacted as the Coast Guard issues orders to secure vessels and facilities, and it’s possible we could see more delays in boat traffic next week as another system being watched by the NHC is given 90% odds of being named and is following a similar path to Lee, but staying further off shore.

4 Libyan ports have reopened to oil exports after the devastating floods that killed thousands temporarily took nearly 1 million barrels/day of supply off the global market.  Here again, traders don’t seem to care as this news did little to slow the rally despite those shutdowns being partially blamed for the run-up in prices earlier in the week.

Ethanol Prices continue to rally this week, reaching a 2-month high following a fire Monday at an ADM plant in Decatur IL which is the largest in the country.  It’s still unclear what caused the fire (besides large amounts of 198 proof alcohol being processed) or how long the repairs to the facility may take.

The EIA this morning published a note highlighting the change in energy consumption for transportation vs pre-pandemic levels this morning, which is interesting, but the data comparison is almost 2 years old, and not reflecting current trends so hopefully they didn’t pay the consultants too much of your tax dollars for the information.

Today’s interesting read from the FT: The new front in the energy wars? Government subsidies on EVs. 

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