Contracts For WTI And ULSD Settle At Lowest Levels In 4 Years

Energy markets are attempting a recovery rally in early Tuesday trading after WTI and ULSD contracts settled at their lowest levels in 4 years Monday. Given the precarious technical position for NYMEX futures, the price action this week may prove pivotal in determining whether or not we see crude oil prices make a run at sub $50 levels, which would drag refined products down another 20-30 cents.

Valero’s Benicia CA (SF Bay Area) refinery had a fire Monday, less than two weeks after the company announced it would be shuttering that facility by April of next year. No one was injured during the fire, which Energy News Today reported was contained to a catalytic cracking unit at the refinery. Investigations are ongoing, and it’s unclear if company personnel are able to be on sight to assess damage or if local officials are blocking access as they did in February when the PBF refinery across the bay from this facility also had a fire. Given the dead-man-walking status of the facility, it’s certainly possible that any severe damage could move up the timeline for closure as the company would have little interest in costly repairs.

Just a few years ago, there were 5 operational refineries in the San Francisco Bay area. As of this morning, only 1 of them is still fully functioning. It almost goes without saying that this type of supply shock has put plenty of upward pressure on regional prices, with gasoline basis values pegged near a $1/gallon premium to futures, while diesel differentials are holding at a 40 cent premium. The latest upset also pulled Southern California prices higher as long haul trucking from the southern half of the state becomes a necessary tactic to offset the rapid loss of production.

Marathon reported a net loss in Q1, but excluding turnaround costs in what the company said was its 2nd busiest maintenance quarter ever, the company showed positive EBITDA results. The company’s RD segment “only” lost $42 million during the quarter, compared to a $90 million loss a year ago as it was able to ramp up run rates at its Martinez facility in a tighter market. The company also highlighted its expansion plans at its LA, Texas City and Robinson IL refineries with a combined investment of around $1 billion to modernize those facilities.

Sunoco continues to spend its MLP money like it’s 2010, agreeing to buy beleaguered Parkland Corp for $9.1 billion and marking a major expansion into Canada. The deal came under immediate attack by one of Parkland’s largest shareholders who accused the company’s board of breaching their fiduciary duty by delaying their annual meeting and agreeing to the sale.