Moves In US Equities Continue To Have Stronger Influence On Energy Prices

It’s a mixed start for energy markets that seem to be consolidating after support held 2 weeks ago and the recovery rally stalled out earlier this week. The daily moves have been erratic, but the size of the swings has been small by historical standards.

Wednesday was another choppy day as both the DOE report and FOMC announcement moved prices. Moves in U.S. equities continue to have stronger influence on energy prices than they did at any point in 2024, with Wednesday’s FED “transitory” relief rally helping to push energy futures back into positive territory for the day. Unfortunately for market bulls, those gains themselves are looking transitory as we see overnight gains turn to losses this morning as stocks point lower once again, dragging refined products back into the red.

The unpredictable nature of the wars in the Middle East and Ukraine continue to be a wild card for energy prices daily as well as the 30 day cease-fire on energy infrastructure didn’t even last 30 hours, while attacks in Gaza and Yemen have ramped up dramatically in the past few days suggesting that any risk premium priced into markets from these events probably isn’t going away anytime soon.

Motiva is beginning restart efforts on an FCC and an Alkylation unit that have been closed since late January for planned repairs. The filing with the TCEQ noted that the company expects flaring through the end of March as they work to slowly bring those units back online. It’s worth noting that yesterday’s DOE report showed PADD 3 refinery runs continue to hold at the top end of their seasonal range, despite permanently losing 260mb/day when Lyondell’s Houston refinery shuttered last month, proving that the larger and more sophisticated facilities in the region are capable of picking up that slack, albeit with less margin for error going forward. That phenomenon also causes a bit of a distortion in the “Refinery Thruput Utilization” figures since the DOE doesn’t yet recognize the loss in capacity in the official numbers, so the real utilization percentages will be around 1.5% higher than published until those numbers catch up.

Flint Hills’ 375mb/day Pine Bend refinery was the center of attention in Minnesota Wednesday after a leaking propane pipeline forced the closure of a major highway on the south end of the MSP metro area. No injuries were reported, and while details are scarce at this point, it doesn’t appear that leak is impacting production of refined products at the facility.

Quantum Commodities reported Wednesday that New Mexico published an updated plan for its Clean Transportation Fuel Standard [LCFS look-alike] program which increased its baseline carbon intensity targets when the program kicks off in July 2026, meaning a reduced burden on traditional fuel producers and more credit generation potential for the renewable crowd. In a microcosm of how these programs typically operate, the states clean fuel standard website is unavailable this morning.

More notes from this week’s DOE status report:

Crude imports continue to slide and are at the lowest point of the year while exports shot up to their highest value of the year. Though the big drop in demand and upswing in the adjustment factor is contributing to the stock build. Refinery runs slid a bit, mostly in PADD 2 as P66 Wood River has a couple units down for maintenance. PADD 1 is still hanging low due to Bayway turnaround along with PADD 5. Runs elsewhere are holding above average along with utilization rates.

Diesel stocks are low everywhere except PADDs 2 & 5. PADD 5 is seeing traditional diesel come back up along with RD, adding almost 1.2 million and ~650k barrels back, respectively. The build puts PADD 5 diesel stocks back at the average line for the first time since the end of last year and with the RD included, it’s above the 5-year range. Increased exports and demand are contributing to the draw but while demand is up on the week, it’s hovered around average levels for the past 3 weeks.

Gas stocks had a smaller draw despite the drop in demand. Inventories are so high in other parts of the country they’re above average overall, but PADDs 3 & 5 are still low. PADD 3 is at the low end of the range but about 3mm barrels above this week last year. PADD 5 has run underneath its range since the third week of the year.