Gasoline Leads, ULSD Lags As Energy Markets Drift In Summer Holding Pattern

RBOB gasoline futures are trying to lead the energy complex higher for a 2nd day, adding 2.5 cents so far, while ULSD prices are slipping modestly into the red. The entire complex remains stuck in a sideways trading range which is fairly common during the summer vacation season, and even more this year with so much up in the air on global trade and policy changes.

Reports that Saudi Arabia would be raising its oil prices for a 2nd straight month is getting some credit for the price strength so far this week, as are concerns that the U.S. will try to hit Russia with harder sanctions given the lack of progress on a Ukraine cease fire.

Russia has also banned all gasoline exports through the end of August as the country struggles to deal with rising domestic prices thanks to Ukraine’s attacks on its refineries and struggles with getting equipment to update and repair facilities thanks to sanctions.

Ethanol has quickly become a contested item in the U.S./EU trade “deal” that’s scarce on details so far, along with the more popular forms of alcohol.

We do know from recent earnings calls that multiple U.S. renewable producers are already sending more of their production to Europe to take advantage of incentives and mandates there, and in most cases to avoid losing more money on sales in the U.S.. What remains unclear with RD and SAF production is if the change to remove the additional incentive for SAF in the updated 45-Z will reduce the amount of jet fuel being produced in the U.S. to satisfy Europe’s mandate.

The ultimate arbitrage: Big trading houses have been big winners the past few years as the world has raced to find ways to bring sanctioned goods to buyers that don’t abide by rules set by the U.S. and EU. Today a FT article offers a look at just how profitable that is as Vitol revealed its annual profits, and its equity buy back program that paid its 600 partners an average of $17.5 million each last year.

The small (21mb/day) in San Antonio reported an upset Monday after the facility lost power when thunderstorms swept through the area. The downtime was short lived and the plant was restarted without further issues reported. There is no tropical activity predicted by the NHC for the next week, but the heat wave that’s hitting nearly half of the country could create some issues for refineries in the next couple of days.

A new lawsuit was filed against California’s LCFS program this week. Ironically, the lawsuit argues that the “Low Carbon Fuel” program actually increases pollution by incentivizing farmers to create renewable natural gas from manure. Renewable natural gas and electricity generated from Biogas has seen huge growth in recent years and this suit could have big impacts on LCFS and D3 RIN values if it goes anywhere.