Oil futures experienced a slight decline in the final trading sessions of 2023, retracing some of the gains made after Christmas.

Market Indecision Amidst Low Volumes

Determining the market's true direction has proven difficult due to low trading volumes. According to the latest data from the CME Group, RBOB volumes on Tuesday fell below 100,000 total lots for the first time since early March. This lack of activity is contributing to a sense of uncertainty in the market.

Book Squaring and Light Headlines

Wednesday's trading activity seems to be primarily driven by book squaring as the year comes to a close. Market-moving news has been scarce, contributing to a quiet trading day. While the market continues to monitor the impact of shippers avoiding the Red Sea route, there have been no production effects aside from increased shipping costs and longer delivery times.

Pullback in Prices

Following a $2 increase on Tuesday, both West Texas Intermediate (WTI) and Brent are giving back some of those gains. As of midday, both contracts were down by approximately $1.25 and holding just above earlier lows. The front-month WTI contract was priced at $74.38/bbl, down $1.20, while the February Brent contract was down $1.26 at $79.81/bbl. The March Brent contract is experiencing higher trading volume and is trading slightly over $1 lower at $79.79/bbl as Brent struggles to maintain the $80 level.

Diverging Refined Product Performance

ULSD futures saw a slight decline, while RBOB managed to make modest gains, suggesting conflicting trends in refined products.

Oil Market Update

The oil market experienced light volumes on Tuesday, with the total volume in RBOB being the lowest since Christmas Eve 2020. This resulted in increased whipsaw action.

On a day with light volumes, both January and February RBOB saw a 5-cent difference between the high and low trades on Wednesday. As of the publication time, front-month RBOB was trading at $2.1757/gal, up 1.74 cents, while February reached $2.1839/gal, slightly higher.

Cash markets are mostly higher due to the gains in futures. However, San Francisco CARBOB prices are witnessing a significant jump of 6.5-7 cents as premiums continue to increase.

In contrast, the diesel market is experiencing a decline. If these losses persist, prices will have fallen in four out of the past five sessions. Mild weather conditions in late December are keeping prices limited heading into the new year. The January contract recently traded at $2.6459/gal, down 2.29 cents, while February reached $2.6254/gal, also down 2.29 cents.

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