Gasoline Prices Surge in Relief Rally, Refineries Recovering, RIN Values Sink

Gasoline prices are leading the energy complex to fresh 3-week highs this morning as the sigh of relief rally in commodity and equity markets continues.  Barring a major reversal lower today, ULSD prices will snap a 7-week losing streak and will break the bearish trend-line that’s been in place since prices peaked at $4.68 in October, leaving room on the charts for prices to rally another 20-30 cents in the near term.

The S&P 500 is poised to reach its highest level since August this morning as the fears over a debt default and the latest banking crisis seem to have largely subsided, which appears to be encouraging a round of risk-on buying that’s spilling over into the energy arena as well. 

Refined product prices across the southwest are rapidly coming back to earth, as expected, now that the two refineries that had been offline for much of the prior 2 months are back up and running. The Phoenix boutique summer gasoline grade known as CBG or AZRBOB grade may be the exception to that rule however, as its premium to LA spot prices has held above $1.50/gallon the past couple of days.  See charts below.

RIN values dropped to a 10-month low Thursday, with 2023 ethanol (D6) values trading at $1.47 for 2023 vintage, and $1.41 for 2024 vintage. Perhaps the most surprising thing about the sell-off is how it’s being done in completely unspectacular fashion, compared to the notorious volatility we’ve seen from the credits over the prior decade. The market continues to wait on the EPA’s final ruling for the RFS for 2023-2025 with the addition of “eRINs” to the program a hotly contested topic. A lessor known detail, but likely a contributor to the softer values lately, is that the agency started allowing biointermediates to qualify for RIN generation last year, which is adding to the supply pool for renewables, most notably for refiners to use partially processed oils in their existing processing units.   

We still have not seen reports filed to the TCEQ for the refinery issues at the Marathon Texas City or Motiva Pt Arthur facilities this week. Valero did publish their report, noting that it was a GDU unit that caught fire at its Corpus Christi West facility Wednesday while attempting to restart. Gulf Coast basis markets continue to treat those disruptions as non-events, with basis values showing minimal changes all week.

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