Energy Futures Giving Back Yesterday's Holiday Shortened Session Gains

Market TalkThursday, Jun 20 2024
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Energy futures are giving back almost all of the gains made during yesterday’s holiday-shortened session as a search for direction begins to emerge after crude oil and diesel prices reached 7-week highs. Charts suggest we may be in for a few weeks of sideways trading unless buyers can push prices up another 5-10 cents before the month's end.

A reminder that since futures didn’t settle yesterday, the price change you’re seeing today is relative to Tuesday’s close. Spot markets weren’t assessed yesterday. The DOE’s weekly status report will be released at 11 am Eastern.

Tropical storm Alberto was finally named Wednesday after a couple of days of a “potential tropical cyclone” label. While the storm is already moving inland over Mexico, it is having widespread impacts with parts of Texas already declaring states of emergency to deal with flooding.

Yesterday we mentioned that the heavy rains brought by this system may interfere with restart efforts at Citgo’s Corpus Christi West refinery, but it was actually their East Corpus Christi plant that reported flaring due to the “heavy rainfall event.” No units were reported to be shut from that upset, and if the refiners in the area can make it another 12 hours, they’ll have dodged their first storm bullet of the year.

Although the forecasts all said this would be an extremely busy year for storms, Alberto was actually the latest named storm in the Atlantic basin for a season in 10 years. Don’t worry though, it looks like we’ll quickly make up for lost time with two more systems being tracked. One on Alberto’s heels is given 50% odds of being named as it moves into the Gulf of Mexico this weekend, while the other lingering off the SE coast is only given 40% odds, but is still set to bring heavy rain to Florida, Georgia and the Carolinas.

The treasury and IRS published guidance on the Prevailing Wage and Apprenticeship (PWA) requirements for renewable fuel facilities to qualify for the new Clean Fuel Production Credit (CFPC) that will replace the blanket $1/gallon Blender’s Tax Credit next year. Without reaching the PWA standards, producers can get a maximum of $.20/gallon for Biodiesel and RD, and $.35/gallon for SAF. If a producer meets the PWA guidelines, they can theoretically earn 5 times the base amount, for a maximum of $1/gallon for RD and Bio and $1.75 for SAF. The actual amount will be calculated by multiplying the maximum credit times the fuel’s emissions factor, meaning many producers will earn much less than the current $1/gallon credit. It’s also worth noting again that importers will not qualify for the CFPC after many years of earning the BTC, which may shake up the supply outlook later this year as anyone who can, will race to dump their barrels into a US market before the credit goes away.

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Market Talk Update 06-20-24

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Market TalkFriday, Jul 19 2024

Summertime-Friday-Apathy Trade Influencing Energy Markets

Energy markets are treading water to start the day as the Summertime-Friday-Apathy trade seems to be influencing markets around the world in the early going. RBOB futures are trying for a 3rd straight day of gains to wipe out the losses we saw to start the week, while ULSD futures continue to look like the weak link, trading lower for a 2nd day and down nearly 3 cents for the week.

Bad to worse: Exxon’s Joliet refinery remains offline with reports that repairs may take through the end of the month. On top of that long delay in restoring power to the facility, ENT reported this morning that the facility has leaked hydrogen fluoride acid gas, which is a dangerous and controversial chemical used in alkylation units. Chicago basis values continue to rally because of the extended downtime, with RBOB differentials approaching a 50-cent premium to futures, which sets wholesale prices just below the $3 mark, while ULSD has gone from the weakest in the country a month ago to the strongest today. In a sign of how soft the diesel market is over most of the US, however, the premium commanded in a distressed market is still only 2 cents above prompt futures.

The 135mb Calcasieu Refinery near Lake Charles LA has been taken offline this morning after a nearby power substation went out, and early reports suggest repairs will take about a week. There is no word yet if that power substation issue has any impacts on the nearby Citgo Lake Charles or P66 Westlake refineries.

Two tanker ships collided and caught fire off the coast of Singapore this morning. One ship was a VLCC which is the largest tanker in the world capable of carrying around 2 million barrels. The other was a smaller ship carrying “only” 300,000 barrels (roughly 12 million gallons) of naphtha. The area is known for vessels in the “dark fleet” swapping products offshore to avoid sanctions, so a collision isn’t too surprising as the vessels regularly come alongside one another, and this shouldn’t disrupt other ships from transiting the area.

That’s (not) a surprise: European auditors have determined the bloc’s green hydrogen goals are unattainable despite billions of dollars of investment, and are based on “political will” rather than analysis. Also (not) surprising, the ambitious plans to build a “next-gen” hydrogen-powered refinery near Tulsa have been delayed.

Click here to download a PDF of Today's TACenergy Market Talk.

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Market TalkThursday, Jul 18 2024

Refined Products Stanch Bleeding Despite Inventory Builds And Demand Slump

Refined products are trading slightly lower to start Thursday after they stopped the bleeding in Wednesday’s session, bouncing more than 2 cents on the day for both RBOB and ULSD, despite healthy inventory builds reported by the DOE along with a large slump in gasoline demand.

Refinery runs are still above average across the board but were pulled in PADD 3 due to the short-term impacts of Beryl. The Gulf Coast region is still outpacing the previous two years and sitting at the top end of its 5-year range as refiners in the region play an interesting game of chicken with margins, betting that someone else’s facility will end up being forced to cut rates before theirs.

Speaking of which, Exxon Joliet was reportedly still offline for a 3rd straight day following weekend thunderstorms that disrupted power to the area. Chicago RBOB basis jumped by another dime during Wednesday’s session as a result of that downtime. Still, that move is fairly pedestrian (so far) in comparison to some of the wild swings we’ve come to expect from the Windy City. IIR via Reuters reports that the facility will be offline for a week.

LA CARBOB differentials are moving in the opposite direction meanwhile as some unlucky seller(s) appear to be stuck long and wrong as gasoline stocks in PADD 5 reach their highest level since February, and held above the 5-year seasonal range for a 4th consecutive week. The 30-cent discount to August RBOB marks the biggest discount to futures since 2022.

The EIA Wednesday also highlighted its forecast for rapid growth in “Other” biofuels production like SAF and Renewable Naptha and Propane, as those producers capable of making SAF instead of RD can add an additional $.75/gallon of federal credits when the Clean Fuels Producer’s Credit takes hold next year. The agency doesn’t break out the products between the various “Other” renewable fuels, but the total projected output of 50 mb/day would amount to roughly 2% of total Jet Fuel production if it was all turned to SAF, which of course it won’t as the other products come along for the ride similar to traditional refining processes.

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Pivotal Week For Price Action
Market TalkWednesday, Jul 17 2024

Week 28 - US DOE Inventory Recap