Gasoline And Diesel Prices Higher Than Before Lockdown

Market TalkThursday, Feb 4 2021
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Gasoline and diesel prices are now higher than they were before the world went into lockdown last year as the bull market for energy futures marches on. The bulls seem to have clear control as prices tick higher for a fourth straight day, but need to clear the February 2020 high trades (just two cents above the highs set last night) if the momentum is going to continue.

Near term fundamentals continue to look weak, but it seems that the market is shrugging off those figures, and focusing instead on the potential for increased demand down the road as vaccinations start to spread more than COVID, and a new stimulus package is expected to keep freshly printed dollars moving into the economy. 

Crude inventories did decline according to the DOE’s weekly reports, but by much less than the API estimate for the week, as imports ticked back up, and refinery runs slowed in 4 of the 5 PADDs. Demand estimates were down across the board, which drove large builds in gasoline and jet fuel stocks, while distillates held steady on the week thanks in large part to a tick up in export volumes. 

Ethanol stocks continue to build as producers seem to be taking advantage of the run up in flat prices, and in RIN values, over the past two months. RIN Values did drop for a third straight day Wednesday, but that seemed to be ignored by the RBOB futures market once again.

In refinery news, a private equity group in Dallas is bidding to buy the shuttered Come-By-Chance refinery in Newfoundland, with plants to convert it to renewable diesel production since that’s what all the cool refineries are doing these days. There were reports that three different FCC upsets happened over the past few days, one on the East Coast and two on the Gulf Coast, which may help explain part of the relative strength in RBOB prices and time spreads this week, but all of those issues appear to be getting fixed and should not have long term impacts on supply.

The EIA’s annual energy outlook was released yesterday, which projected estimates that U.S. oil production and consumption will take years to recover from the pandemic. The report also highlights the uneven impacts of the COVID lockdowns, and how the return to normalcy may look very different among sectors of the economy.

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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.

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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