Energy Markets Continue Trading Lower For the 4th Straight Session

Energy markets are trading lower for a 4th straight session testing the low end of their recent trading ranges, and threatening a much bigger slide if buyers don’t step in soon.

The weekly DOE report continues to show a glut of supply across the middle of the country while the coasts are much more balanced. That excess supply overhand has pushed Group 3 gasoline prices to $1.75 this morning and Chicago values to $1.80, both of which are the lowest of the year. Gulf Coast RBOB values are also threatening to break below $1.80 for the first time this year and the TX RVP transition today will only add to the excess supply potential in the region and put more pressure on exports out of the Gulf Coast as shippers will want to minimize moving products north at negative values.

P66 gave an update on the wind-down of its 139mb/day refinery in Wilmington California Wednesday, saying the facility had received its final crude shipment this week and would wrap up crude processing around October 16. The full idling of the facility will continue through the end of the year, and the company is accruing around $100 million to account for environmental and other expenses related to the shutdown. The company said it remains committed to supplying the southern California market, and some of that supply will come from its 105mb/day Washington refinery that was recently upgraded to produce CARBOB spec gasoline. While the Ferndale facility can’t replace all of Wilmington’s output, it will be encouraged to send more barrels south as the WA Cap & Trade costs are trading well above California’s which will encourage those with Jones Act vessels to send more barrels south.

The BLS will not be publishing the September Jobs report as scheduled Friday due to the Government shutdown. The Department of Energy meanwhile has kept its doors open and announced that it was terminating 223 previously approved projects focused on testing new renewable and other “cleaner” energy technologies. While the announcement didn’t list the details of the projects that had their funding cut, it did argue that nearly half of the $7.5 billion in funding cuts were from projects approved by the DOE between the election and inauguration.

French troops have seized a Russian oil tanker headed for India’s sanctioned refinery overnight, and there are suggestions that this ship may have been launched the drones that forced Denmark to close several airports last week. Meanwhile, India’s diesel exports to Europe have just reached record high levels as their expanding refineries continue to take advantage of Russia’s lack of buyers, and Europe’s lack of production.

While Hurricane Imelda moves further away from the U.S., the NHC is tracking 2 new potential storm systems in the Atlantic this week. The first is set to bring more heavy rain to Florida in the coming days but is only given 10% odds of being named. The other is given just 20% odds of development as it moves over the Atlantic towards the Caribbean.

Notes from the DOE’s weekly status report.

Crude posted a small build despite large drops in demand and refinery runs which lend to a much larger increase to the crude balance. Fall refinery maintenance is spreading through regions with PADDs 1, 3, & 5 all slowing down last week. However, overall run rates and utilization remain high across the country with PADD 5 being the only area anywhere near its 5-year average.

Diesel inventories surpassed 2024 levels for just the second time this year as export activity pulled back following last week’s huge increase and demand remains seasonally low. Changes by PADD were minimal outside of PADD 5 seeing an update to renewable stock levels. RD readings for July fell but traditional diesel increased to the top of its range, holding the PADD 5 plus RD chart well above its seasonal 5-year range.

Gasoline inventories posted a healthy build across the board, adding 4mm barrels and pulling back to average levels with imports picking up as demand slid. PADDs 1 & 3 hold near the lower end of their ranges while the rest are running above, particularly PADD 2 where stocks have increased four straight weeks to buck the seasonal trend of levels declining into November before picking back up.