Hurricane Lee Continues To Loom Large, OPEC’s Oil Output Increased By 113mb/Day

WTI is taking a turn trying to lead the energy complex higher to start Tuesday’s session, reaching a new high for the year at $88.61 in the early going, while ULSD futures are seeing a modest pullback after reaching at new 8-month high at $3.4027 Monday.

Hurricane Lee continues to loom large, with the chance of a strike on New England increasing as it makes its slow journey towards the coast.  Some models have Lee making landfall as a tropical storm Sunday between Portland and Bangor Maine, with tropical storm force winds extending to Boston and Providence which is likely to force several terminals in the area to close as a precaution over the weekend. The “official” US model used by the EIA has Lee coming close to making a direct hit on St. John New Brunswick, home to Irving Oil’s 320mb/day refinery that is both Canada’s largest facility and the largest importer into the US East Coast. That plant is scheduled to begin its largest turnaround project in years on Sunday, the same day the storm is going to hit, which is good news for short term supplies since the market was already prepared to do without that plants production, and bad news for the 2,300 workers scheduled to be brought in for the project who may not have packed a rain suit.

A Reuters note cited the turnaround at Irving, along with planned work at Delta’s Trainer PA refinery for the recent strength in distillates, that have seen a strong rally in outright values, and spreads. While the recent strength in ULSD calendar spreads is certainly noteworthy, it also pales in comparison to what we saw last year (see charts below).

OPEC’s oil output increased by 113mb/day last month according to its September Oil Market Outlook released this morning, as increases from Iran and Nigeria offset the ongoing voluntary reductions from Saudi Arabia. The US and Iran have been playing nice with each other in recent days, which could allow for more exports to flow from that country that’s still producing well below capacity due to sanctions.  

OPEC’s economists held their outlook for the global economy and oil demand steady for the month, and revised their non-OPEC supply estimates for the year slightly higher due to additional output from the US, Brazil and Norway. The report also highlighted strong refining margins in August with strong jet fuel and kerosene demand helping to strengthen diesel prices. In shipping news, OPEC’s analysts highlighted that rates to ship crude oil internationally continue to decline as new options expand, while rates for shipping refined products continue to increase. 

The EIA’s Short Term Energy Outlook will be released later this morning while the IEA is attempting to stay relevant with lofty claims that the world is almost sort of just about ready to start using less fossil fuels.

Exxon reported another upset at its recently-expanded Beaumont TX facility but said the malfunction in a release valve on an FCC unit only last 10 minutes, which probably means little to no impact on production at the facility that now unofficially ranks as the 2nd largest in the US.

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