Energy Futures Rise as Flooding Risks Grow and Refinery Activity Shifts

Energy futures are ticking up this morning with the oils (heating and crude) leading the way higher each with 1% gains to start the day. Gasoline and European crude benchmarks are tagging along for the ride, with ½% gains in pre-market trading.

The good news is that Invest 93L is less likely to develop into a tropical depression than it was yesterday. The bad news is the system has slowed and poses an increased flood threat along the Louisiana coastline, from New Orleans to as far north as Baton Rouge and as west as Lake Charles. As of now rain accumulation is expected to be the highest along the LA coast, but some forecasts are calling for increased rain reaching into East Texas, some as far as Houston.

Speaking of Baton Rouge:

More details have emerged surrounding the DOE-XOM exchange deal that will see up to 1 million barrels of SPR crude oil given to ExxonMobil’s BR refinery and returned in excess at a later date. The refiner cited a zinc contamination issue with crude oil it received from Chevron as the reason for its logistical hardships and the DOE cited the Energy Policy Conservation Act as its legal means to lend the barrels from its reserves. Oil inventories in PADD 3 (as reported by the DOE) were at >5 year seasonal lows last week, lending some semblance of credence to the refiner’s request for assistance. As of this morning, its been reported that Exxon has resumed its purchases of the Mars grade crude oil, scheduled for August delivery.

Speaking of DOE:
Diesel stocks bounced on heavy imports (all of which landed on the East Coast), the biggest week to week drop of the year in exports, and a 2nd consecutive week of lowered demand. PADDs 2 & 3 accounted for 96% of the just over 4mm barrel build, but both of those PADDs along with the others are still running along the bottom end of their 5-year ranges despite the healthy increase last week. Gas stocks built as well with a demand slide that overshadowed a large drop in import activity. At the PADD level, it’s a mixed bag of over/under average inventories leaving total U.S. gas storage right at its seasonal average.

Crude shed almost 4mm barrels with increased exports outweighing up imports and another big swing in the adjustment factor, holding stock levels below their 5-year range. Refinery runs dipped across PADDs 2-5 leaving the lone increase on the week to PADD 1. However, P66 had to shut their Bayway refinery in New Jersey earlier this week due to power loss from storms Monday night. Bayway is the largest refinery in the Northeast and the one responsible for the massive drop on the PADD 1 runs chart back in February. Overall, run rates are still at the top of their ranges in PADDs 1-3 and around average levels in 4 & 5, for now.

Speaking of Bayway:

EnergyNewsToday reported yesterday that Phillips is attempting to restart their New Jersey refinery and the plant should be back up to full operation over the next 24 hours, barring any operational hiccups.