ULSD Futures Trying To Lead Energy Complex Higher To Start Wednesday Session

ULSD futures are trying to lead the energy complex higher to start Wednesday’s session, trading up 4 cents/gallon and reaching a fresh 3-month high at $2.6412, but are finding WTI and RBOB to be somewhat unwilling participants in the early going.

The API reported gasoline inventories in the US dropped by 2.8 million barrels last week, but the decline seems to have been largely shrugged off as RBOB futures are only up around ½ cent in the early going. The report showed a small draw of 100,000 barrels for diesel and 800,000 barrels for crude oil. The DOE weekly report is due out at its normal time, and the weekly demand estimates will be closely watched after the big drop from the holiday hangover last week.

A new report from the IEA this morning said electricity demand in Europe is set to drop to its lowest level in 20 years due to the fallout of last year’s energy crisis, but demand is expected to rebound strongly next year. A follow-up note from the FT suggests this is exactly why Western economies need to prepare for Russia to take another swing with its energy sword in the next year.

While Tropical Storm Calvin batters Hawaii and Tropical Storm Don continues to do loops in the open Atlantic, the NHC is also tracking a new potential storm system moving off the coast of Africa this week. That system is only given 20% odds of developing at this point, but as we move into August we typically see more activity in this region, including several of the biggest storms of all time.

Click here to download a PDF of today's TACenergy Market Talk