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Energy Analyst - KC Energy
Rising inventories, tight diesel supplies, and shifting OPEC moves are keeping markets on edge. In this episode of Focus on Fuels, StoneX’s Alex Hodes and Trevor McClanahan break down what’s driving current price levels – and what could come next.
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Key Takeaways:
Energy markets are looking for a supply-demand tipping point. According to McClanahan’s analysis, Saudi Arabia is still ramping up output – adding about 411,000 barrels per day. That sounds like a lot, but it’s coming in carefully. “They’re trying not to crash the market,” he said. The catch? It’s not clear if global demand is strong enough to absorb it all.
While geopolitical threats haven’t disappeared, traders are more focused – at least for now – on summer consumption and refinery activity. That could change fast if tensions flare again.
Hodes flagged diesel as a an important energy market focal point. Inventories are scraping the bottom of the barrel, at their lowest in 15 years. Why? A rough winter, refinery downtime, and ripple effects from Middle East conflicts.
McClanahan describes the market as being in a “tight setup,” saying, “if anything breaks, we could see a big price move.” Both agree that this could be the time for those looking to hedge to pay heed. Per their view, the forward curve is in backwardation – where near-term diesel contracts are expensive, while ‘out months’ are cheaper. They say this can often represent a sign to lock in.
Unlike diesel, propane is seeing strong builds. McClanahan pointed to weaker export flows, which are letting U.S. inventories grow. In his view, this is a sign to wait. Prices might dip further by late July or early August. That, he says, is when the market may bottom out.
As for crude, neither expects fireworks. Hodes described the outlook as “sideways with a chance of drift up.” But diesel’s tightness could pull the whole complex higher if it worsens.
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---Written by: Andrew Catsimanes, Copywriter
---Experts: Alex Hodes, Director of Energy Market Strategy and Trevor McClanahan, Energy Risk Manager
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