Mixed Start To October's Final Trading Week As Crude Retreats

It’s a mixed bag to start the last trading week of October with refined products chopping back and forth on either side of break-even overnight, while crude oil contracts are seeing losses of $1.5-$2/barrel.

Ukraine’s drones did not strike any Russian oil refineries over the weekend, but they did hit a Siberian petrochemical facility that makes MTBE, rocket fuel, and many other products. Reports this morning suggest Ukraine has offered the U.S. 3 different options to agree to an energy ceasefire: 1) Get Russia to stop hitting Ukraine energy targets 2) allow starlink usage over Russian territory or 3) give Ukraine more patriot missiles to protect against the Russian bombardment. The avoidance of Russian refinery targets over the past week may be in an effort to allow the U.S. time to respond, and if an agreement isn’t reached it wouldn’t be surprising to see them resume.

The Houthi’s claimed strikes over the weekend on the 400mb/day Rabigh refinery in Saudi Arabia in addition to other Aramco oil processing facilities in Yanbu and pumping stations for the critical “East/West” Pipeline. Saudi officials are set to meet with leaders from Turkey, Pakistan and Iran today in Tehran to discuss a way to prevent the return to all-out war in the region that appears inevitable at the moment.

The UKMTO reported another ship was attacked by a projectile and disabled Friday while trying to transit outbound through the Strait of Hormuz. Meanwhile, an oil spill from a tanker that was struck last month continues to spread forcing the UAE to close multiple beaches and complicating some port activities as well.

Chicago basis differentials came back to earth Friday after spiking earlier in the week thanks to the latest upset at Exxon’s 275mb/day Joliet refinery. There are no new updates on the status of the facility, but the price action suggests the reformer unit that was shut is likely back up and operating. While the Chicago spot market is notoriously volatile, this type of price spike is likely to play out again and again over the coming months as the low inventory levels across most of the country amplify any operating upsets.

Prices to lease space on Colonial’s main gasoline line (Line 1) spiked to a 2.5 year high just below 10 cents/gallon Friday as the seasonal play to ship winter-grade gasoline to the East Coast is finding extra value this year given the complicated shipping situation around the world.

Chevron reported a gas release Friday at its 250mb/day Richmond CA refinery to Bay Area officials, with neighbors near the facility complaining of rotten egg smells from the hydrogen sulfide that was reportedly released in the upset.

PBF meanwhile has a 17 day streak of reporting at least 1 flaring incident per day to Bay Area officials at its 157mb/day Martinez refinery. San Francisco basis values have been unimpressed by the upsets at both of the 2 remaining oil refineries in the region (there were 5 refineries here just 5 years ago) with CARB diesel values dropping sharply Friday in the first trade in nearly a week, while CARBOB gasoline values moved very little throughout the week as the state’s decision to end the summer-grade RVP season early has helped bring new gasoline barrels to the market.

RIN values reached a 6 month low last week as the EPA mulls punting its Small Refinery Exemption re-allocation to 2027, and the September RIN generation showed a healthy increase in D4 and D5 RIN generation of more than 13%, while D6 RIN generation dipped by 7.5%. D6 RINs hit a low of $1.60 earlier in the week and ended Friday’s session around $1.73. See the charts and table below for more detail on the RINs being generated.

Money Managers were only making small moves in their energy contract holdings last week, with minor increases to net length in ULSD, Brent and Gasoil, while RBOB and WTI saw modest decreases in the large speculator length.

Baker Hughes reported an increase of 1 oil rig active in the U.S. last week, while the natural gas rig count dropped by 1.

The Primary Vision count of fracking crews active in the U.S. dropped by 5 last week, after declining by 4 the week prior.