Diesel prices still rising

Options traded in New York are heavily wagering that diesel prices will rise.  The number of bets on the price rising is up 6% in the last week.  The last time we had this kind of activity was 2006.  What do these traders see?  The price of crude has been on a tear and demand for road transportation has grown stronger – and carriers are ordering more trucks.
Energy pipelines have been in the news:
  • Keystone XL owner TransCanada announced  oil companies are on board to ship 500,000 barrels a day for 20 years, “positioning the proposed project to proceed” 
  • Pipeline companies are avoiding fights with environmentalists and instead are making existing pipes bigger or flow in the other direction
Both these moves help the diesel market.  But for those of you in the North East, natural gas storage is failing to meet supply – there is just not enough capacity. When that happens, the market can go haywire.  In Boston, while gas is normally $3 per million BTU’s, it rose to over $400 in some peak hours. There is a lesson here for distillate (like diesel) users – make sure you support positioning the infrastructure ahead of demand.