Diesel Stocks Continue to Shock

On February 6, 2014 by TradingDesk

Diesel stocks – or the lack thereof – continue to shock as levels across PADD 1 are now 33% below 1 year ago, and more than 50% below their 5 year average, just in time for another round of winter storms to hit the East Coast. For many consumers, physical shortages in the region – similar to propane and natural gas consumers in other parts of the country – have reached desperation levels. Meanwhile, gasoline stocks continue to hold near record high levels for this time of year, as output remains high and the same storms that have caused diesel demand to spike have limited gasoline consumption.

So, naturally, gasoline prices have rallied 7 cents in the past 24 hours while diesel prices are up only 2 cents. It’s impossible to say what exactly is causing this type of counter-intuitive price action, but there is a possibility that since $2.60 held support for RBOB, and since we are in the seasonal window for bottoming gasoline prices, that we are witnessing the start of the spring rally. The first major hurdle to confirm this suspicion will be at the 50 day MA just below $2.68, which has already repelled one overnight rally. Meanwhile, if ULSD prices can hold above the $3 mark, there is little standing in their way technically or fundamentally, from another rally into the $3.20s.

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