Energy Complex Struggles To Rally As RBOB Leads, ULSD Lags

RBOB gasoline futures are trying to lead the energy complex higher for a 3rd straight day after nearing a 5 year low on Tuesday, with minimal success so far. ULSD futures continue to lag the rest of the complex in the recovery bounce, coming within 2 points of their December lows overnight before moving back towards breakeven levels for the day. The lack of enthusiasm by buyers after 2 weeks of heavy selling suggests that we’re seeing a consolidation pattern rather than a reversal of the bearish trend. We’ll also see liquidity start to dry up quickly as we move towards Christmas and New Years.

Santa Claus rally? Basis values across the country have been recovering this week after most cash markets saw outright values hit multi-year lows. The exception to that rule comes from the NYH market that has seen a steady slide in basis values since November’s supply squeeze, and the closing spread between NYH and USGC values has wiped out most of the premiums that were being paid to ship barrels along Colonial.

Marathon reported unplanned flaring at the Wilmington section of its 365mb/day Los Angeles area refining complex Thursday afternoon due to an unknown cause that was under investigation according to the company filing with the AQMD. This comes less than 3 days after the company had an unplanned flaring event at the Carson section of the complex.

Phillips 66 reported a release of cyclohexane (let me google that for you) at its Sweeny TX refinery tank farm. That event does not appear to have impacted refining operations.

The EPA’s RIN generation report for November showed a sharp drop off in D6 (ethanol) and D4 (Bio/RD/SAF) RIN generation for the month, despite SAF production reaching an all-time high. It seems likely we’ll see SAF production continue to hold at record levels in December as producers try to take advantage of the extra 75 cents/gallon potential incentive in the CFPC (45Z) tax law that will go away January 1, and then it’s likely we’ll see a healthy amount of that output shift back to RD production next year. Imports remain just a fraction of what they were in prior years as the CFPC doesn’t offer any benefit for importers, and if the EPA’s proposal to cut RIN generation for imports by 50% is finalized, it’s likely we’ll see those volumes drop even further. RIN values stabilized Thursday after being pushed to their lowest values in more than a month earlier this week.

Ukraine continues to expand its attacks on Russian energy assets, this time hitting an empty shadow fleet tanker in the Mediterranean according to reports overnight. The strike appears to have been timed for when the tanker was empty after offloading in India earlier in the month, to avoid environmental concerns among Ukraine’s European allies.