Pipeline Shutdowns, Refinery Issues, And Seasonal Volatility Driving Outlook Higher

Refined product futures are trying for another rally this morning after their strong morning gains fizzled out Monday afternoon. Today it’s the RBOB contract attempting to lead the complex higher, up a little over 3.5 cents just before 8am central, while ULSD futures are clinging to penny gains.

NYH cash RBOB markets are sliding down their exceptionally steep backwardation curve with premiums dropping to around 24 cents/gallon down from 32 cents late last week. This time next week terminals in the region will be allowed to start selling winter grade products so there are only a handful of trading days left to erase the rest of that premium. The current spread between summer and winter gasoline is larger than what we’ve seen since the chaos of 2022 and is creating more than the normal amount of transition related terminal disruptions as some suppliers would rather shrug their shoulders at a runout rather than risk the financial pain of having left over summer product at these lofty price levels.

The fireworks are continuing in the PNW spot market as the Olympic pipeline shutdown looks set to continue for a 7th day. Premiums for Conventional regular UNL in the PNW spot market are approaching a 2 year high at a $1/gallon premium to futures. The rally in CARBOB markets slowed Monday but has not yet reversed course, with LA and SF spot markets holding premiums in the 55-60 cent range. On the diesel side, premiums for ULSD in the PNW are holding just below a 50 cent premium to futures, while CARB #2 in both LA and SF are hovering around 25 cents without much in the way of actual trading activity the past couple of days. Upsets at both the PBF Torrance and Chevron El Segundo refinery are both getting credit for the elevated basis values, in addition to the pending shutdown of P66 Wilmington.

P66 reported to Southern California regulators that it planned on flaring at its Wilmington refinery through the end of the month as they begin the slow process of permanently idling that facility. While that shutdown has been big news for the market, it absolutely doesn’t mean that P66 is exiting the refining business, and in fact is buying out Cenovus from their share of the WRB joint venture refineries in Wood River IL and Borger TX for roughly $1.4 billion.

The Reuters renewable rumor mill is alive and well this morning, with a report that new legislation will be proposed today that would block the EPA from shifting the obligation for renewable blends avoided by the recently granted small refinery exemptions from being spread out to larger refiners via a larger total target. That bill will have the aesthetically pleasing title of The Protect Consumers From Reallocation Costs Act of 2025. RIN values have dropped to 3 month lows this week following reports Friday that the White House would be reviewing a proposal from the EPA on how to allocate those exempted gallons.