Gasoline Prices Are Trading Near A 5-Month Low This Morning

Market TalkTuesday, Oct 3 2023
Pivotal Week For Price Action

Diesel prices are leading the energy complex lower this morning with 7 cent losses for the prompt November contract in the early going, reaching a 1 month low. Gasoline prices are trading near a 5-month low this morning as the seasonal demand decline coincides with a rough stretch of weather on the East Coast that’s putting a heavy damper on driving.   Time spreads are also coming under pressure as record warm temperatures have fears of potential refinery-maintenance induced shortages are put on ice for now. 

WTI has also dipped to its lowest levels in 3 weeks which may signal that the hedge funds who had been adding to their bets on higher prices may be heading for the exits now that the complex has lost its upward momentum. Inventories at the Cushing OK trading hub remain extremely low as suppliers shift their focus to the export market and may continue driving more demand to the new WTI contracts that settle in Texas instead of Oklahoma.

The RIN reset continues with D4 values approaching a 3 year low below $1/RIN this week, following a study that shows nearly 50% of California’s diesel demand is now being covered by RD and Bio supplies.   That study also suggests it’s possible, and perhaps even probable that RD primarily will effectively replace traditional diesel in the state over the next decade thanks to numerous blending credits and the lack of a blend-wall for RD. Of course, one problem with that projection is that producers are making $1/gallon less now than they were just a few months ago due to the drop in RIN prices, and if that trend continues, we could see some of the many new production projects in the works put on hold or scrapped completely.

Meanwhile, California’s order to waive summer-grade RVP requirements early – in an effort to combat its other policies that helped drive yet another inventory squeeze at the end of the season – has pushed basis values for prompt CARBOB supplies down more than $1/gallon over the past 3 days. 

One of the biggest unknowns in the refining business these days is if/when the new 650mb/day Dangote refinery will open in Nigeria, which could have a major impact on Atlantic basin refining economics and crude oil supplies. Meanwhile, while that project drags on years after its original planned start up, the country continues to struggle to supply refined products to its citizens, with tragic consequences.

Texas is bidding to add winter electricity capacity to avoid a repeat of the tragic cold snap in February 2021, which also caused the largest combined refinery disruption in history. We are seeing yet another reminder of how dependent the refining industry is on that same electric grid as an unexpected power loss tripped a Corpus Christi facility offline late last week, which is causing product allocation restrictions in the San Antonio area this week. 

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

Market Talk Update 10.03.2023

News & Views

View All
Market Talk Updates - Social Header
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.

Market Talk Updates - Social Header
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.

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

Pivotal Week For Price Action
Market TalkWednesday, Jul 17 2024

Week 28 - US DOE Inventory Recap