Oil Products Jolt Amid Middle East Uncertainty And Supply Constraints

The rollercoaster ride continues with a wave of selling that started after a strong settlement Monday after the U.S. President “called off” an attack on Iran apparently scheduled for today, based on alleged progress in negotiations, and requests from other countries in the region. This morning, Qatar issued a statement that the negotiations “need more time” but it’s not clear yet if this means talks have broken down once again, or if they’re just stating the obvious.

Shockingly, ship transits through the strait of Hormuz remain close to zero, despite Iran announcing a new Bitcoin-backed insurance program to encourage more ships to transit the war zone.

Despite today’s pullback, the ascending triangle patterns on RBOB and ULSD charts continue to hold, keeping the chances of another big rally on the table for now.

The EPA’s waivers on boutique fuel grades are set to expire Saturday, although the agency has made it clear they intend to extend all of the waivers issues this spring through the summer time. The piecemeal method of waiving the RVP, RFG and butane blending limits seems to be contributing to the lack of adoption among many states, which is severely limiting its impact on supply.

Negotiations between BP and the USW started and stopped again Monday with BP accusing union negotiators of walking out shortly after talks resumed for the first time in months. Union workers at the Whiting IN refinery have now been locked out for more than 2 months as the facility did not join the nationwide bargaining agreement set over the winter. The facility continues to operate with replacement workers. Chicago area basis values have been extremely volatile lately with multiple refinery upsets and maintenance taking longer than expected adding to the volatility. Conventional gasoline values have dropped to be the cheapest in the country after starting the month trailing only California spot prices, while distillates still command a healthy premium of 40-50 cents over neighboring markets, down from a $1/gallon premium a couple weeks ago.

There’s a new twist in the decade-long Citgo Saga: Venezuelan lawyers are arguing that the company is now worth significantly more than it was during last year’s auction thanks to the war in Iran, and urged the U.S. to not execute the deal recommended by a U.S. court last year.

RIN values continue to hold in a narrow range slightly below the record highs for D4 and D6 values as the EPA still has not released its April data on RIN generation. Anecdotal evidence suggests that RD and Biodiesel production has been increasing dramatically thanks to the spike in diesel and RIN prices this year, but the early results still keep RIN generation well below what’s needed to hit the record obligation set by the EPA in the most recent rule.