Energy Futures Are Trying For A 2nd Day Of Gains After A Roller-Coaster Of A Trading Session Monday Ended On A Strong Note

Energy futures are trying for a 2nd day of gains after a roller-coaster of a trading session Monday ended on a strong note, shrugging off a surge in the US dollar and weaker equity markets. 

Reports Monday that US troops in Syria had come under attack again with a drone that killed 6 allied Kurdish soldiers, seemed to be contributing to the rally as it is now clear that the retaliation efforts are far from over, and any hopes of a quick resolution to the violence are fleeting. Israel also announced a new ground offensive near the border with Egypt, suggesting negotiations for a cease fire weren’t going anywhere this week.

The first week in February has seen a strong recovery in crack spreads, with values on the Gulf Coast pushing to their highest level in 6 months as a busy spring maintenance season kicks off, and some facilities are still repairing units after the January freeze, while Mid-Con values are recovering after reaching their lowest values since 2020. 

Basis values in the Mid-continent cooled Monday after a big rally to start February as traders continue to wait on news from BP Whiting’s unplanned shutdown due to a power outage last week.  More news is expected on restart efforts and the expected duration later this afternoon.

A state of emergency was declared in 8 California counties as 3 days of heavy rains caused flooding and mudslides. Marathon reported unplanned flaring at its LA-area Wilmington refinery Monday morning, although it’s unclear if that upset was weather related. So far there have not been reports of terminals or pipelines being knocked offline by the heavy rains, so the supply impacts appear to be minimal at this point, although demand is no doubt slowing dramatically until the roads dry out.

The controversy surrounding 2 Bay-Area refinery conversions isn’t really news at this point, but one point in a recent news article is noteworthy as it highlights the physical challenges with Hydrogen refiners face when making RD and SAF. Flaring immediately ramped up following that [Marathon Martinez] refinery's conversion, largely tied to the more intensive use of hydrogen needed to process renewable diesel.

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