Warm Trends, Cool Markets: A Week in Review – Distillate Contango in NY Harbor
Climate change. No matter what your scientific, political ,economic or superstitious position is on this topic, there’s no question that things are getting warmer. Now if you want to debate the cause and effect, that’s an equine of a variable hue. We might never really know what’s causing it to get warmer..… Well, my temperature’s rising, and my feet on the floor / Crazy people knocking ’cause they’re wanting some more / Let me in, baby, I don’t know what you got / But you better take it easy, this place is hot. So…get your garden planted.
U.S. diesel consumption so far this year is below the previous 5 year average, mainly because of warm winter weather. It’s true that there has been some substitution of biofuels in lieu of distillate, but that has mostly been on the left coast. The fact of the matter is that the first quarter of 2024 was one of the warmest winters EVER and was 5% warmer than last year’s record. The trend is your friend. If you’re not burning distillate, then you have no choice but to store it. Commensurate with that, NYMEX ULSD futures are showing a seasonal contango, despite the fact that crude oil remains backwardated. Of course, The Tank Tiger was on the leading edge of all of this, as we saw a big spike in inquiries for distillate storage over the last couple of weeks. Yes….we have the data. I’ll bring the beers….I’ll bring the beers. Brent crude finished the week at $89.50 a barrel with US WTI crude futures following closely at $83.85 a barrel. The strength in the US Dollar has been wrestling with geopolitical concerns as oil traders retreat to the sidelines, and try to decide which way things might go next.
This week we have the Federal Reserve meeting and jobs report and, unlike climate change, we might learn if the economy is actually cooling off. Last week’s GDP numbers weren’t great, growing at its slowest pace in two years. Meanwhile, the PCE inflation continued to play whack a mole. This combination can be troubling to the economy as a whole. Having said that, there’s little doubt that interest rates will remain unchanged after the Fed pontificates. The tech sector picked up the fallen flag and raced up the hill last week, and the S&P 500 had its best week since last October. Google-parent Alphabet absolutely crushed their earnings numbers and announced its first-ever dividend and a $70 billion stock buyback. $$$MR. MARKET$$$ says buy Google in your portfolio and don’t ever sell it.
Congrats to Tivoli Midstream team for their just announced acquisition of The Chocolate Bayou Assets. This facility consists of approximately 3.0 million barrels of storage capacity, open land available for development and an extensive footprint of logistics assets. With over 100 storage tanks, the Chocolate Bayou Assets can handle a wide variety of renewables, refined products, specialty chemicals, LPGs and other products. Strategically located on the Chocolate Bayou, the Chocolate Bayou Assets have exceptional multi-modal connectivity through Union Pacific direct served rail, truck and barge access, in addition to a significant pipeline system between Freeport, Texas and Texas City, Texas. The marketplace needs more chemical storage tanks. If you’re looking for chemical storage, let us know. The Tank Tiger will tirelessly search for you and our service is FREE.
