Profit Taking Leads to Declines in Petroleum Complex

Profit taking following the previous session’s rally has resulted in mostly declines in the petroleum complex as of midday Tuesday. However, crude oil has pared some losses and is now trading as the front-month position for WTI futures.

Cooling Tensions Lead to Price Correction

On Monday, tensions in the Red Sea and news of a Ukrainian drone strike on a Russian Baltic oil port caused markets to jump. But prices have cooled down as Libya has resumed production of 300,000 barrels per day that was previously shut-in.

March WTI Futures Retreat from Highs

March WTI futures reached a high of $75.25, but they have since backed away from that level. Currently, they are trading near $74.50/bbl, down 26 cents from the morning. Earlier in the day, March WTI futures had traded down as much as $1.35.

March Brent Also Pulls Back

Similarly, March Brent has also pulled back from its earlier highs, resulting in a nominal decrease in the contract. It is currently trading at $79.72/bbl, down 34 cents.

Mixed Performance for Refined Products

Refined products are experiencing mixed performance, with ULSD futures inching higher, while RBOB futures are giving back some of Monday’s strong gains that brought them to the highest levels of 2024.

RBOB Futures See a Decline

Both February and March RBOB futures are down by about 3 cents as we approach midday. February RBOB is trading at $2.2091 per gallon, down 2.87 cents, while March RBOB stands at $2.2327/gal, down 2.83 cents.

RBOB Faces Pressure Amid Low Demand Expectations

The recent storms and bitter cold weather have put pressure on RBOB, as expectations for low demand rise. Early indications from OPIS demand data reveal a decline in volumes during the past week of several percentage points.

West Coast Floods Impact U.S. Products Demand

In Southern California and San Diego, heavy rain and flooding have inundated the region. This is expected to have a notable impact on the overall demand for U.S. products. The differentials for both Los Angeles and San Francisco CARBOB have dropped by a few cents, resulting in a decline in prices around the 5-cent range by midday Tuesday.

Diesel Futures Inch Back Amid Market Shifts

While diesel futures initially saw an increase, they are now slowly moving back towards unchanged as the rest of the market experiences shrinking price gains.

ULSD Futures Show Modest Increase Alongside Milder Weather

As we head into midday, February ULSD futures have risen by just under a penny, reaching $2.7027/gal. Meanwhile, March futures last traded at $2.6758/gal, with an increase of 1.21 cents. The spread between the two months continues to compress due to the approaching expiration of the February contract and relatively milder weather conditions.