Crude Steady While RBOB Leads Gains Amid OPEC Demand Downgrade

Refined product futures are drifting higher this morning with the prompt month RBOB contract leading the way with ~0.01 gains so far in premarket trading. NYMEX HO is trading ½ cent higher in sympathy, while WTI is hovering around yesterday’s settlement.

The White House’s “major announcement” yesterday turned out to be a more tame affair than anticipated: the President announced that the U.S. will be sending more weapons to Ukraine via NATO (which was made public previously) and that Putin has a new 50-day deadline to make peace or face a fresh round of economic sanctions from the U.S.. Unclear repercussions if an arbitrary deadline isn’t met didn’t foster any bullish sentiment yesterday, energy futures reversed course mid-morning and ended Monday in the red.

OPEC released its monthly report this morning, revising their global oil demand expectations lower for the next four years. Unsurprisingly, the cartel doesn’t see “peak oil demand on the horizon”, the existence of which may complicate their efforts in profitably regaining market share by unwinding production cuts. On the other hand, the International Energy Agency expects global oil consumption to peak in 2029 due to a slowdown in China’s economic growth and the continued adoption of electric vehicles.

Last week we learned the new 45Z rules, which have undergone many changes since being introduced in May, favored RD, bio, and ethanol production. Sustainable aviation fuel was the big loser, as the proposal cuts 75 cents from its credit cap, raising concerns about whether it will remain viable for many producers to manufacture. Another lingering question is how the IRS will track the credits. One method allows farmers to freely sell feedstock crops and LCFS credits separately while the other requires those crops be delivered directly to a bio producer to keep the credits physically tied with the crops generating them. Regardless of the tracking method, the program will become more stringent, but some key details have yet to be fully fleshed out.