Energy Prices Reverse As Market Shrugs Off Tanker Attack, Focus Shifts To Supply Constraints

Energy prices are back in the red Friday after a solid Reversal Thursday rally fueled by setbacks in the race to reopen the world’s most important energy chokepoint, and one of the last remaining refineries on the U.S. East Coast.

It’s just a flesh wound. The healthy drop in futures prices so far today suggests oil traders aren’t too worried that Iran’s attack on a tanker near Oman Thursday will disrupt vessel traffic through the Strait of Hormuz long term, even though the UN-back program to get stranded vessels moving was forced to pause its operations following the attack. Reports that Saudi Arabia has resumed loading oil at its giant Ras Tanura port for the first time in 4 months is helping make the case that while the short term may be rocky, the return towards something resembling normalcy long term is still moving forward.

While news of the Iranian attack certainly helped propel oil prices higher Thursday, those gains paled in comparison to the 4-5% jump in refined product prices following news that Delta Airlines’ 185mb/day Monroe refinery in PA had caught fire while attempting to restart one of the units that had been forced offline more than a week ago following a hydrogen leak. 4 employees were injured in the 3-hour long blaze, but report suggest none were life threatening. So far it’s unclear how or if the fire will impact restart efforts on others portions of the refinery, but rack allocations in a handful of surrounding markets remain tight as a result of the lost production over the past week.

And suddenly there are lots more companies trying to hire a fuel pricing manager: A class action lawsuit has been filed in California accusing major retail fuel station operators of colluding to raise prices by handing off those decisions to an AI-powered software program.

Washington State Cap & Invest credit values have plummeted this week after the state signed on to link its program with California and Quebec, vastly expanding the supply pool for credits. California Carbon Allowance values have moved modestly higher based on the news as the WA linkage adds incremental demand, albeit at a much smaller level relative to the size of each state. This linkage will absolutely not help the glut of RD building across California as the incentive to bring barrels further north along the West Coast has largely been erased, but it could help reduce the amount of traditional refined products being brought to CA from WA as the relative disincentive to sell traditional fuels between the two states has also collapsed.