Oil And Fuel Prices Climb As OPEC Output Boost, Geopolitical Tensions, And Refinery Explosions Spark Early Gains

Energy markets are starting the week with modest gains, despite OPEC announcing another output increase over the weekend. RBOB gasoline futures are attempting to lead a recovery rally for a 2nd straight session after prices reached a multi-month low last week.

OPEC & Friends agreed Sunday to increase November’s output once again, but the 137mb/day TARGET increase was lower than many estimates last week – and reportedly lower than the Saudi’s were pushing for. Keep in mind that the actual output increase will be lower than the target since several countries still have to make up for cheating their quotas earlier in the year, while others simply can’t physically reach their target.

Chevron reported 4 unplanned flaring events at its 290mb/day El Segundo CA refinery after the explosion and fire sent shockwaves through the community and market on Friday morning. The flaring events appear to be caused by operators adjusting unaffected units to facilitate production while the fire-impacted unit(s) are being assessed. Los Angeles Jet Fuel differentials saw the biggest impact as the Hydrocracking unit that caught fire accounts for an estimated 40% of demand in the Southern California region. The jump in ULSD and CARBOB basis was less dramatic, but still noteworthy, and we saw neighboring markets like San Francisco, Las Vegas and Phoenix all have their spot and rack spreads rally in sympathy.

Does this mean Columbus Day has been cancelled too? The CFTC’s weekly commitments of traders report was not released on Friday due to the government shutdown. The agency said once operations return to normal their reporting will resume in chronological order. ICE continued to publish its weekly position data meanwhile, showing a net decline in speculative bets on higher Brent crude oil prices last week, while Gasoil (Europe’s ULSD equivalent) saw a small net increase.

The biggest position move on the week came from 10,000 new speculative short bets on Brent, suggesting hedge funds piled on early in the week as prices pulled back.

The net length in Gasoil has stretched to its highest level since just before Russia’s full invasion of Ukraine in early 2022, and suggests that hedge funds are eager to bet that prices will continue higher due to the threat of new sanctions and the ongoing attacks on Russia’s refining network.

Speaking of which, Ukraine reportedly hit 2 more Russian refineries over the weekend, including the 400mb/day Kirishi plant which is one of largest in the country. This note highlights the various challenges in accurately estimating the impact of these drone strikes on total output, although estimates that between 1-2 million barrels/day of production are off-line seem realistic, which equates to roughly 1.2%-2.4% of the total global production of gasoline and diesel.

Baker Hughes reported a drop of 2 oil rigs drilling in the US last week, snapping a 5 week streak of gains, while the natural gas rig count increased by 1. The decline in oil rigs this week was concentrated in the Permian basin which has seen its rig count stagnate as drillers get more concentrated in the country’s most prolific basin. Meanwhile, Primary Vision’s count of fracking crews held steady at 179 for the week, snapping a 4 week streak of gains.

The NHC is giving 70% odds of another storm being named in the next week as a low pressure system moves across the Atlantic. Like most of the other storm systems so far in 2025, this one is projected to hook north and east and stay offshore as it progresses, suggesting the East Coast will dodge yet another bullet while the Gulf Coast has remained eerily quiet.

The EIA on Friday highlighted Mexico’s continued dependence on the US for imports of refined products and natural gas, while US imports of Mexican crude continue to decline. A note from Oilprice.com highlights how the Dos Bocas refinery, which was supposed to be key to Mexico’s fuel independence has instead become a liability.

Delek’s Big Spring TX refinery had a “small” explosion Saturday morning although the company has not yet made a filing to suggest what unit(s) were impacted. No injuries were reported and the fire appears to have been contained.