Market Rally Boosts Energy Prices Amid Low Stockpiles, Refinery Incidents
A strong sigh of relief rally swept energy and equity markets Wednesday, pushing gasoline and diesel prices to a 3-week high.
Refined products gave up most of their early gains in the wake of the DOE’s status report yesterday, which showed another soft week for demand, but prices ripped higher not long after during the President’s news conference in which he said that a debt default was unlikely [this year at least] as negotiations were making progress.
Inventories remain at the low end of their seasonal ranges, with the Midwest (PADD 2) looking particularly tight on supply with stocks well below their 5-year range for this time of year on both gasoline and diesel. PADD 5 looks tight on diesel supplies, but we believe those inventories are significantly understated as the DOE’s weekly survey is not yet capturing the renewable diesel inventory that has made dramatic increases across the region this year.
The government’s estimate for diesel demand last week was lower than the same week in 2020 when the country was just starting to think about emerging from the COVID lockdowns. Gasoline demand isn’t nearly as bad as diesel, still hovering around its 5-year average, but can’t yet be considered strong either, despite much lower retail prices this year offering some hope for a pick-up in consumption as we kick off the driving season.
Oil inventories saw another healthy increase as the DOE found more than 6 million barrels of unreported crude oil last week, another casualty of the agency’s survey not keeping up with the actual products being produced, while the official oil output figure continued to hold steady just north of 12 million barrels/day. The DOE also quietly reported a removal of 2.5 million barrels of oil from the SPR last week, which essentially negates the proud announcement of a 3-million-barrel purchase plan they made Monday.
Another day, another refinery fire. Wednesday saw a blaze at a Corpus Christi facility, but no injuries were reported, and so far, it does not appear there’s much of an impact on terminal supplies on the Central Texas corridor supplied by the facility. We’re still waiting on official reports on the deadly blaze at Marathon’s facility over the weekend, and rumored reports of an upset a Motiva’s plant, which would mark significant upsets at 2 of the country’s 3 largest facilities in just 3 days. So far, Gulf Coast basis markets continue to act as though nothing has happened, so it seems unlikely that there’s going to be a notable impact on supply from these events.