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Diesel Market Positioned for Inventory Draws and Exports

Minneapolis, MN | July 25, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC

The market structure supports the consensus forecast, but we aren't yet seeing signs of acceleration.

The authors of the EIA’s most recent Short Term Energy Outlook (STEO) join the chorus of analysts pointing to falling inventories as a driver of their expectations for rising crude oil prices during the second half of the year. Lower expected production out of OPEC+ and slower non-OPEC production growth are expected to cause tighter markets, especially given the modest upward revisions to expected consumption. This is only a minor pivot from the consensus view of the major public analysts. They “remain bullish,” assuming no disruptions or surprises. More interestingly, many analysts are catching on to the fact that headline Brent and WTI prices are less informative than spreads. As they do, notice their extremely high price forecasts are moderating, and their discussion turns to the price relationships between crude grades, among regions, reflected in cracks spreads, and across time. With this, we see decent support for the bull case, possibly supportive of the recent run, but with strong headwinds, mainly because spreads in fuels have not kept pace. The recent crude rally pushed crude oil prices to the top of the recent range and only within the priced-in volatility.

*This summary is based off July 16, 2023

A free excerpt, such as this one, will be published on a delay periodically. This is an excerpt from Blue Lacy Advisors, LLC's (“Blue Lacy”) weekly commentary for clients, which is based on a collection of models, research/analytical subscriptions, and bespoke work. Each week Blue Lacy explores how market drivers included in these analyses might affect or be used in clients' planning, budgeting, and execution of strategy. Call Blue Lacy to make an appointment today!


Meet the Author!

Phone: +1-832-413-3124

Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.

He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.

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