Energy Markets Attempt To Bounce Back As Selling Stalls Out

Energy markets are attempting to bounce Tuesday after the momentum of 4 days of selling stalled out in Monday’s session. The back-and-forth action leaves the complex in neutral technical territory making more choppy but aimless action likely in the weeks ahead.

Diesel prices are leading the charge today, up 3 cents in the early going, with the impact of Russia’s rapidly dropping supply once again getting credit for the relative strength. More sanctions against Russia are expected to be discussed at today’s UN meetings, while the “most effective sanctions” levied by Ukraine’s drones are expected to force Russian diesel exports to their lowest levels since the COVID lockdowns in the next few weeks.

Another one bites the dust: BP announced it has stopped work on its Rotterdam biofuel facility, the 4th facility the company has halted work on in the past year as economics to produce RD and SAF have gone negative in the face of ever-changing regulations and relatively low traditional diesel prices. One important detail is the company seems to be signaling they’re no longer interested in building standalone biofuel facilities, but they remain interested in increasing their co-processing capacity at existing refineries.

Citgo reported its Corpus Christi terminal rack was temporarily shut Monday afternoon as severe weather swept through the area, but so far there are no reports of weather-related upsets at its adjacent refinery, or at any of the neighboring refineries operated by Valero and Flint Hills from those storms, although Valero’s West Plant did have a hiccup over the weekend.

Beaumont TX also faced a flash flooding warning as thunderstorms swept along the coast, but so far there are no reports of upsets at any of the large refineries that call the Pt. Arthur/Beaumont area home.

4 workers were injured by a flash fire at Citgo’s Lake Charles LA refinery Monday, but all of them are expected to be OK and operations were not impacted by the event. Meanwhile, the auction for Citgo’s shares was suspended temporarily last week to allow the bankruptcy court to evaluate another court’s ruling that bonds issues by PDVSA in 2020 were valid, making them part of the repayment equation.

The fire at HF Sinclair’s refinery in Sinclair WY over the weekend was reportedly contained to an asphalt tank and did not interrupt operations at either the traditional or renewable diesel operating units at the facility.

Hurricane Gabrielle was the latest storm to go through rapid intensification this year, increasing from a tropical storm to a major Hurricane in under 24 hours. That storm is at category 4 status this morning, but is well offshore, and will not directly threaten the U.S. coast.

There are 2 more storm systems following behind Gabrielle that are a bit more concerning. The system farthest to the West has the more concerning location, and its odds of developing have increased to 60%. That system looks like it could hit the coast of North Carolina next Sunday night/Monday morning and bring heavy rain to the region, although it will hook back out to sea which will minimize the impact. Forecast models continue to disagree on how intense this storm may get between now and then, but the recent tendency towards storms blowing up in size in short periods of time make it concerning. In particular for those in North Carolina still getting over the devastating effects of last year’s Hurricane Helene.

The other system is given 90% odds of being named, and very well might go through rapid intensification like Gabrielle and Erin both did but should follow a similar path and stay offshore as it moves north. While direct impacts to the U.S. coast are unlikely, high seas look like they’ll be coming for the better part of next week which may disrupt some waterborne deliveries, but otherwise none of these systems should have a major impact on the fuel supply chain.