Markets Snap Back Amid Attacks, Supply Risks, And Policy Uncertainty

Energy markets are rallying once again as the mid-week sell-off was dealt another dose of strait reality with more ships being attacked, and little progress to get supply moving once again.

An Indian cargo ship was sunk after being attacked off the coast of Oman, the 2nd ship to be sunk since the war broke out less than a day after Iranian forces seized a ship off the UAE coast.

This morning the President suggested that the U.S. may need to do “a little clean-up work” in Iran while returning from his trip to China.

No major deals were confirmed from the summit this week, although the usual promises of energy purchases with few details are being thrown around.

PBF reported more emergency flaring at its 155mb/day Torrance CA refinery, the 2nd such notice in the past 3 days. The LA Spot market continues to act unfazed by those upsets, with CARBOB premiums falling to their lowest levels since early March this week.

PBF also continues to report ongoing flaring at its 157mb/day Martinez CA refinery, as it struggles to bring that plant fully online 15 months after a major fire took out multiple units. Energy News Today is reporting that the company’s bid to restart an FCC unit shuttered since that fire have failed, with more extended downtime for that unit expected as a result. San Francisco CARBOB markets did tick higher Thursday following a slide earlier in the week.

RIN values have held relatively steady this week, taking a pause in their furious rally that’s seen values double since the start of the year to reach record highs. The market seems to be waiting on the latest monthly RIN data from the EPA (which is a moving target on timing, but should be released today) and word from Washington on the latest proposals for E-15, and more importantly for RIN values, the Small Refinery Exemption plans. A compromised version of the bill that’s been pushed for years to allow for year-round E-15 passed the house this week, and includes a 75% automatic exemption for small refiners, of which 75% would automatically be reallocated. One key note often overlooked in the E-15 headlines is that this version of the bill appears to leave the Small Refinery exemption definition alone, applying the waivers to the facilities, not the parent company. Alternative proposals would have restricted waivers to companies whose TOTAL capacity falls under the 75,000 barrels/day threshold which would excluded companies like Delek and HF Sinclair who operate multiple small facilities. This bill would need 60% approval in the Senate to move forward to the President for approval.

Send it in Jerome. Today is Jerome Powell’s last day as chair of the Federal Reserve, a position he’s held since 2018. Powell will remain on the FED’s board of governors however, something that hasn’t happened in over 75 years, citing the unprecedented verbal and legal attacks from the President (who appointed Powell to the Chair position in 2018) and the need to ensure the FED’s independence. The CME Group’s FedWatch tool shows that despite the President’s urging, pretty much no one is betting on a rate cut this year, but about half of the money bet on fed fund futures expects at least one rate increase by year-end, a percentage that’s grown rapidly in the past week in the wake of he most recent inflation reports.