Gasoline Futures Attempted To Pull Energy Complex Higher

Market TalkFriday, Feb 1 2019
Petroleum Complex Selling Off

Gasoline futures are attempted to pull the rest of the energy complex higher to start Friday’s trading as a rash of refinery issues have encouraged buyers to push up near-term prices. Diesel futures are still trading in the red however as a quick 50-70 degree warm-up after this week’s record-setting cold snap will end the spike in heating demand. Thursday’s session will be remembered for another large reversal in oil and refined products, after WTI and ULSD briefly hit new highs for the year, showing that the bulls may be lacking conviction to break out of sideways trading range, but most contracts did finish January with healthy gains, snapping a 3 month losing streak.

The list of Midwestern refineries having issues due to extreme cold continued to grow Thursday, with outages reported and/or rumored at Citgo, BP, Marathon, Husky and P66 plants in the region, and strong cash market buying (note the Chicago RBOB basis values in the chart below) suggesting they weren’t the only facilities having problems. The two big questions become 1) was any long term damage done and 2) will consumers even notice given the large numbers of businesses & schools shuttered due to the weather.

Those refinery outages, coupled with the large drop in total US refinery runs the DOE reported for last week, seems to be helping gasoline time & crack spreads find a bid in the past couple of days. With March futures taking the prompt position today, there is now a 20 cent spread between the first and second RBOB contracts as we approach the always-volatile spring RVP transition.

It’s been a busy week of earnings reports for all segments of the energy industry. A few common themes seem to be a continued race to build infrastructure that will support the latest US Oil boom, good – not great – domestic consumption, and plenty of concern about the global economy in 2019.

The January jobs report was released this morning, in which the Bureau of Labor Statistics seems to have given credence to one of Mark Twain’s borrowed phrase about the 3 types of lies. The agency made a huge cut back in December’s estimated job growth from 312k to 222k jobs for the month. The January figure was estimated at 304k jobs, while the official unemployment rate ticked up .01% to 4.0%. If you’re wondering, the bureau didn’t count the hundreds of thousands of Federal employees who were not being paid as unemployed in the official numbers. The U-6 rate, which doesn’t exclude unemployed people the BLS doesn’t classify as unemployed, was up to 8.1% from 7.6% the week prior. Stocks and energy futures seemed to tick up slightly after the report as this bit of good news for January, bad news for December, seems to add to the “Patient Fed” plan that’s encouraged investors since Wednesday’s FOMC announcement.

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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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Week 28 - US DOE Inventory Recap