Crude Holds Firm While Refiners Capitalize On Tight Global Fuel Supplies

Refined products are seeing losses for a 2nd day, while crude oil prices hold near break even as the Middle East stalemate continues, and threats to both supply and demand continue to spread.

ULSD futures are down around 12 cents from the high set Wednesday, but are still up 30 cents for the week, and more than 50 cents from the low set last week when a new deal was dangled by U.S. officials, who look increasingly desperate to say whatever they can to cool off prices as more signs emerge of the damage high prices are doing to the U.S. and global economies.

Some headlines suggest the modest pullback in prices after the huge rally over the previous week was thanks in part to the U.S. Energy Secretary claiming that actual exports through Hormuz are much higher than many independent estimates, mainly due to ships moving covertly through the waterway. On one hand the Energy Secretary certainly has access to much more information than most of us, and certainly has a resume that suggests he truly understands the industry vs a generic political appointee. On the other hand, this was the same person who sparked one of the biggest head fakes in oil market history when he falsely claimed that the U.S. Navy was escorting ships through Hormuz all the way back in March.

Meanwhile, private groups continue to say that transits through the strait are down sharply since the MOU that officially expires Monday was thrown in the trash can a few weeks ago, and two more tankers from the UAE were attacked by Iranian drones yesterday.

Bad timing or a spreading war? An explosion killed one person and injured several others at a Gunvor fuel terminal in Rotterdam, which is part of Europe’s largest port facility. Given the “war creep” around Europe lately, and Gunvor’s roots as a Russian oil trading firm (the company is now the world’s 4th largest oil trader and owned by employees) there will be speculation that this could be another attempt at asymmetric warfare, although police are saying there are no signs of sabotage currently. Adding to the mystery surrounding this event, there are reports that Exxon was forced to shut its 190mb/day Rotterdam refinery today due to a power outage with some news outlets saying the blast caused the outage, while others suggest the two events were unrelated.

Ukraine has not struck a Russian refinery in the past 24 hours, but the Houthis are claiming they hit Saudi Arabia’s 400mb/day Jazan refinery for a 2nd time this week overnight. That facility was already offline for repairs due to the previous strikes in July and August, but if true the latest attacks will no doubt complicate the recovery process.

Citgo reported its Q2 earnings, continuing the trend of huge profits in the refining sector, while also showing improvement in its marketing and supply segments vs the prior quarter. Since Citgo is not publicly traded, it does not report year on year earnings comparisons like most of its competitors. The company highlighted record ULSD exports from its Brownsville TX facility, and like many others has chosen to defer some maintenance at its refineries until 2027 to take advantage of the huge margins available for operating refiners this year. The company did not mention anything about its potential sale that appears to have been put on the back burner by the U.S. Treasury after years of making its way through U.S. courts.

There are still 2 potential storms systems in the Atlantic being tracked by the NHC, but the odds of developing have been dropping over the past 24 hours and neither one seems to be heading towards the U.S. even if they do get a name.