Week in Review – May 6, 2022

This week readers learned about the European Union and their crude ban, how American inflation is continuing to rise, and East Coast diesel prices skyrocketing this week. Over the weekend, the European Union started to lean heavily toward completely banning Russian oil imports by the end of 2022. Diplomats from the EU engaged with European Commission members this past weekend and said that this would be the likely outcome. Later in the week the president of the European Commission laid out what will be a phased oil embargo on Russia. But that will not be all. The EU is also committed to sanctioning Russia’s top central bank in order to further isolate the country for the crimes they have committed over the past few months, specifically the executions of civilians taking place in small towns in Ukraine. One positive that traders will take away from this is that the crude ban does not go into effect for another six months. This transition time will smooth the change for a region that relies so heavily on Russia for their crude and natural gas imports.

Inflation is also becoming a problem that consumers are having to deal with as it becomes more severe. Many experts are increasingly expecting that inflation in the United States will be a prolonged problem for many years to come. From buying your next carton of milk at the supermarket to filling up your car with gasoline, prices continue to rise. For example, in the past 12 months, gasoline is up 48%, natural gas is up 21.6%, meats/poultry/fish/eggs is up 13.7%, and the list goes on. Now, Moody’s Analytics Chief Economist Mark Zandi believes that inflation is becoming a self-fulfilling prophecy. As more people expect prices to rise in the future, they stock up on goods now, stoking demand and driving prices even higher.

Lastly, this week Mansfield published a supply alert for the East Coast based on dwindling inventories and tightening supplies. Much of the supply challenge is caused by backwardation – with future diesel prices trading below current levels, those holding fuel inventories lose money if they carry more fuel. This has been particularly challenging in the Southeast, impacting states including Georgia, North Carolina, and Virginia. Adding to complexity on the East Coast, New York Harbor diesel prices are skyrocketing, with recent NYH basis trading at 95 cents over the NYMEX. Basis is the difference between the June NYMEX ULSD contract (4.1602 in the chart above) and current physical prices. Since the NYMEX trades based on fuel delivered to New York Harbor, there is no geographic difference – just a time difference. To read yesterday’s full FUELSNews article click here.

Prices in Review

WTI Crude opened the week at $104.00. Prices were extremely volatile this week with many changed. Crude opened Friday at $108.70, an increase of $4.70 from Monday.

Diesel opened the week at $3.9940. Similar to crude, diesel was very volatile, with Monday to Tuesday having a major climb. Today diesel opened at $4.0573, an increase of $0.0633 from Monday.

Gasoline opened the week at $3.4350. Prices for gasoline climbed throughout the week, hitting its highest price of the week on Friday. Gasoline opened today at $3.6700, an increase of $0.235 from Monday’s opening price.