Volatility Roars Back
- Trade talks pushed to the back burner
- Large price swings are endemic to the energy markets
- Price volatility can be an opportunity to differentiate
- Natural gas storage deficit erased, summer looms
Sincerely,
David Thompson, CMT
Executive Vice President
Powerhouse
(202) 333-5380
The Matrix
A week ago, the possibility of direct talks between President Trump and President Xi of China held the attention of all markets, not just energy. Few things can move a trade war between the world’s two largest economies off of the front page – a threat to the safe passage of oil through the Strait of Hormuz is one of them.
By their very nature, political and military crises are difficult to analyze because information is very limited and one person’s decision can often shape the arc of the entire event. The Energy Market Situation strives to be more than a recap of the past week’s events. This week’s edition will attempt to focus on things that are in our readers’ control rather than on the myriad of things that aren’t.
Over the past four trading days, diesel prices have rallied over 30 cents as Israel launched a major military operation against Iran. The speed and intensity of the move might astonish the casual observer, but fuel distributors know that price volatility is a feature, not a bug, of the energy market. In less than a year’s time, the ULSD futures market has seen four swings of fifty cents or more.
Savvy companies use volatility to their advantage. Aside from spurring customers to act, big price swings offer marketers an opportunity to set themselves apart from their competitors.
Heating oil dealers that haven’t launched a winter price cap program yet will likely find homeowners much more concerned about higher energy prices now.
Commercial diesel marketers can educate worried end-users about how they can protect the value of their inventory with downside price protection. This conversation can genuinely transform the customer relationship demonstrating how they can both be on the same side of the table.
POWERHOUSE constantly talks with our clients about the ways in which option strategies may be an appropriate tool for their businesses. A fifty cent price move overcomes many objections to the cost of an option. A simple question like “Are you worried about a big price drop occurring right after you decide to buy fuel?” can reveal a great deal about your customer’s biggest concerns.
One of POWERHOUSE’s clients said yesterday “19 cent ranges certainly give opportunity”. We couldn’t agree more. Contact us if you’d like to deal proactively with market volatility.
Supply/Demand Balances
Supply/demand data in the United States for the week ended June 6, 2025, were released by the Energy Information Administration.
Total commercial stocks of petroleum increased (⬆) 6.2 million barrels to 1.2415 billion barrels during the week ended June 6th, 2025.
Commercial crude oil supplies in the United States were lower (⬇) by 3.6 million barrels from the previous report week to 432.4 million barrels.
Crude oil inventory changes by PAD District:
PADD 1: Up (⬆) 1.3 million barrels to 9.5 million barrels
PADD 2: Down (⬇) 2.1 million barrels to 105.4 million barrels
PADD 3: Down (⬇) 2.5 million barrels to 242.6 million barrels
PADD 4: Down (⬇) 0.2 million barrels to 24.6 million barrels
PADD 5: Down (⬇) 0.1 million barrels to 50.3 million barrels
Cushing, Oklahoma, inventories were down (⬇) 0.4 million barrels to 23.7 million barrels.
Domestic crude oil production increased (⬆) 20,000 barrels per day from the previous report at 13.428 million barrels per day.
Crude oil imports averaged 6.176 million barrels per day, a daily decrease (⬇) of 170,000 barrels. Exports decreased (⬇) 621,000 barrels daily to 3.286 million barrels per day.
Refineries used 94.3% of capacity; an increase (⬆) of 0.9% from the previous report week.
Crude oil inputs to refineries increased (⬆) 228,000 barrels daily; there were 17.226 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, increased (⬆) 172,000 barrels daily to 17.364 million barrels daily.
Total petroleum product inventories increased (⬆) by 9.9 million barrels from the previous report week, up to 809.1 million barrels.
Total product demand increased (⬆) 235,000 barrels daily to 19.762 million barrels per day.
Gasoline stocks increased (⬆) 1.5 million barrels from the previous report week; total stocks are 229.8 million barrels.
Demand for gasoline increased (⬆) 907,000 barrels per day to 9.170 million barrels per day.
Distillate fuel oil stocks increased (⬆) 1.2 million barrels from the previous report week; distillate stocks are at 108.9 million barrels. EIA reported national distillate demand at 3.376 million barrels per day during the report week, an increase (⬆) of 225,000 barrels daily.
Propane stocks rose (⬆) 4.0 million barrels from the previous report to 66.0 million barrels. The report estimated current demand at 580,000 barrels per day, a decrease (⬇) of 208,000 barrels daily from the previous report week.
Natural Gas
The combination of overall milder weather, strong production and maintenance at LNG export facilities has allowed U.S. natural gas storage levels to move from a 10% deficit in mid-March to 5% above normal currently. However, it’s important to note that storage levels, while above average, are 9% below year ago levels and shoulder season is now over. Some analysts now forecast a return to a storage deficit over the course of the summer.
According to the EIA:
- Net injections into storage totaled 109 Bcf for the week ended June 6, compared with the five-year (2020–24) average net injections of 87 Bcf and last year’s net injections of 77 Bcf during the same week. This weekly injection marks the seventh in a row above 100 Bcf, the longest streak since 2014. Working natural gas stocks totaled 2,707 Bcf, which is 139 Bcf (5%) more than the five-year average and 256 Bcf (9%) lower than last year at this time.
- According to The Desk survey of natural gas analysts, estimates of the weekly net change to working natural gas stocks ranged from net injections of 96 Bcf to 117 Bcf, with a median estimate of 106 Bcf.
- The average rate of injections into storage is 29% higher than the five-year average so far in the refill season (April through October). If the rate of injections into storage matched the five-year average of 8.1 Bcf/d for the remainder of the refill season, the total inventory would be 3,892 Bcf on October 31, which is 139 Bcf higher than the five-year average of 3,753 Bcf for that time of year.
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