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Largest Remaining East Coast Plant Forced To Shut A Unit

Tuesday, May 4 2021
Market Talk

ULSD futures reached a 16-month-high overnight while gasoline contracts are just a penny away from fresh multi-year highs of their own as technical and fundamental factors combine to push the energy complex higher. The stage was set for a rally on the charts when buyers erased losses early in Monday’s session, keeping the upward momentum set last week intact. Then reports overnight that the P66 refinery in Bayway, NJ (the largest remaining plant on the East Coast) was forced to shut a unit unexpectedly sent prices sharply higher.  

If ULSD can break (and hold) above $2, and RBOB can do the same at $2.17, there’s room on the charts for another 11-12 cents of gains in the near future. 

It seems like the only headwind for the bulls this morning is a pullback in U.S. equity markets, with some indices pointing towards their lowest levels in two weeks at the open. The correlation between daily price moves in the S&P 500 and energy futures has strengthened significantly in the past couple of weeks, after having gone dormant for the past couple of months.

RIN values reached new record highs Monday, adding a nickel or more depending on the contract, and are pointed higher again to start Tuesday’s session.  The new EPA administration asked a Federal Court to vacate three small refinery exemptions granted in the last days of the old EPA administration. One thing to watch, grain prices have started to see large intraday swings, with big early gains turning into afternoon losses, which could add more volatility to the notoriously volatile RIN market. 

CVR joined the list of refiners blaming RINs for rough first quarter financial performance, while REG group gave credit to the 159% year on year increase in D4 bio RINs for its increase in Revenue. 

More environmental challenges for refiners this week. Colorado’s only refinery faced tough challenges in the hearing about renewing their air permits, while the plant formerly known as Hovensa received a violation notice from the EPA that could eventually halt production at that facility.

An EIA report this morning highlighted the growth in bio-mass-based diesel imports into the U.S. last year, even as total diesel consumption dropped sharply due to COVID lockdowns. Renewable diesel accounted for 60% of those imports, with all of that product coming from Singapore. Exports of biodiesel – most of which go to Canada – were also up in 2020, and there’s likely to be increased competition from buyers as Canada’s clean fuels program goes into effect next year. 

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