About The Author

Phil Flynn

Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665

The ultra-low sulfur diesel crack spread cracked up, hitting a new record high, as physical buyers are scrambling to secure supply. I have talked to many of my physical players and there are reports that some parts of the country are unable to get diesel supply. Panic buying is starting to happen, as some dealers ration supply. Other dealers seem to be ok.

Ken Williams of Scott Williams incorporated, a retail heating oil distributor in Boston says that, “in my market area which is South of Boston more than adequate have no concerns at all.”  He is supplied by Citgo terminal, and they tell him for now it’s good. No need to worry now but other dealers are not having that same calm to their fears. Another dealer said that he’s hearing that there are spot shortages of heating oil and diesel in places like Virginia.

Bloomberg News reported last week that, “The US Northeast is so short on heating oil that the fuel used to power home on furnaces is being rationed even before the start of winter. Some wholesalers in Connecticut are putting retailers on allocation, meaning they can only get a limited amount of fuel based on availability, according to Chris Herb, president of the Connecticut Energy Marketers Association, which represents around 600 family-owned retailers in the state. These retailers must in turn ration their customers.”

These stories, along with the fact that the demand cover for distillate fuels is only 25 days, have buyers driving up the crack spread, and we saw a big explosion to the upside. With the crack spread being high, oil at some point will have to follow.

Oil is getting a boost from the fact that China seems to be lifting some COVID restrictions along with the fact that Europe is going to put on a price cap that’s going to make prices ultimately go higher. Reuters reported that, “The Group of Seven rich nations and Australia have agreed to set a fixed price when they finalize a price cap on Russian oil later this month, rather than adopting a floating rate, sources said on Thursday. U.S. officials and G7 countries have been in intense negotiations in recent weeks over the unprecedented plan to put a price cap on sea-borne oil shipments which is scheduled to take effect on Dec. 5 – to ensure EU and U.S. sanctions aimed at limiting Moscow’s ability to fund its invasion of Ukraine do not throttle the global oil market.”The market is clear that this price cap will probably do more to restrict supply than it will hurt Russian oil interests. Price caps will create shortages in the market. We’re seeing that being reflected in the upward surge.

Oil prices are now above the Bollinger band on the daily and suggests that if we close up above this area, we still have significant upside to go. The crack spreads are pulling back from a record high in heating oil and the gasoline crack spreads look very bullish. Obviously as we get closer to winter the upside risks for prices will continue to rise. This is why we’ve been suggesting to be hedged against upside risk and it’s clear that those hedges are starting to pay off.Natural gas pulled back after a weekly report that was rather bearish based on expectations. Yet today is turning higher. Weather reports suggest winter is a lot closer than many people want to acknowledge. The EIA reported that, “Working gas in storage was 3,501 Bcf as of Friday, October 28, 2022, according to EIA estimates. This represents a net increase of 107 Bcf from the previous week. Stocks were 101 Bcf less than last year at this time and 135 Bcf below the five-year average of 3,636 Bcf. At 3,501 Bcf, the total working gas is within the five-year historical range.

Even though we’ve seen some pretty good increases in supplies over recent weeks, the switch to cold weather and reopening of the LNG export terminals, could make those market look very bullish. Use the weakness to put on bullish strategies going into winter.Make sure you invest in yourself! Tune to the Fox Business Network! Invested in you!

Call to get the Phil Flynn Daily Trade Levels by calling 888-264-5665 or by emailing pflynn@pricegroup.com. Have a great weekend!


Phil Flynn

The PRICE Futures Group

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network


141 West Jackson Blvd., Suite 1920, Chicago, Illinois 60604

312 264 4364 (Direct)  |  888 264 5665 (Direct)  |  800 769 7021 (Main)  |  312 264 4399 (Fax)



Please do not leave any instructions for orders in your message, as we cannot execute instructions left through email or voicemail. Orders must be entered via direct verbal communication with a representative of our firm. We cannot be held responsible for orders left in any other manner.  PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Investing in futures can involve substantial risk & is not for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses. Member NIBA, NFA Phil Flynn

Questions? Ask Phil Flynn today at 312-264-4364        
Tagged with: