Rebound In Energy Prices Overnight Coincided With Recovery Rally In Equity Markets

RBOB gasoline futures are taking a turn trying to lead the energy complex higher Friday morning after reaching a fresh 4 year low overnight. ULSD and WTI are resisting the pull higher so far, hovering near break-even levels after trading down to 4 month lows.

The rebound in energy prices overnight coincided with a recovery rally in equity markets that were dealing with the latest crisis of confidence in credit markets. While energy and equity markets have not had a strong correlation for most of the year, anytime the fear trade takes over the “risk off” effect tends to push both asset classes lower.

Ask him how his refineries are doing: Thursday’s session saw product prices move from gains to losses following reports that the U.S. and Russian presidents would meet again in the near future to discuss terms for ending the war in Ukraine. While the odds of real peace still seem like a long-shot at the moment, there’s no doubt that Ukraine’s U.S.-aided drone campaign against Russia’s energy infrastructure is at least encouraging the negotiations to occur.

The EPA reported a 20% increase in D4 RIN generation in September as Renewable Diesel production recovered to its highest levels of the year after a slowdown in August. SAF output also saw a small uptick, while biodiesel production remains stagnant and imported biofuels remain non-existent in the report. Traditional ethanol RIN generation held steady for the month and both D4 and D6 RIN values seemed unfazed by the report, hovering near 6 week highs throughout Thursday’s session.

The Countrymark refinery in nowheresville Mt. Vernon Indiana had a small fire Thursday but given its location and relatively small capacity (35mb/day) that doesn’t seem to be having any influence on cash markets in the region.

Notes from the DOE’s weekly status report:

Crude built with refinery runs slowing down significantly across all PADDs except 1 as production hit a fresh record high. PADD 1 only added 4,000 barrels per day but is sitting well above typical seasonal levels. All other PADDs fell to a mix of just above or below 5-year averages except PADD 5, which is on week 3 of declining runs and back down to levels not seen since spring. The total US run rate dropped to just 62,000 barrels per day over average after spending most of this year at the height of its 5-year range and the utilization rate fell from 92% to 85% week to week.

Diesel inventories drew in all PADDs except 5, which continues to hold at the high end of the 5-year range, well above when considering renewable diesel. Middle of the country PADDs are tracking around average levels while PADD 1 had the largest drop, pulling the total U.S. count lower, although still ahead of the past two years.

Gasoline stocks drew across all PADDs except 1, where its increase held the overall count to a small net decline, staying right on track with the 5-year average. Ethanol stocks and production continue to track above their 5-year ranges and propane/propylene exports kicked up to another seasonal high as well.