Record Exports, Refinery Upsets, And A Technical Turn In Energy

Reversal Thursday is in effect for petroleum markets with selling across the board after 3 straight days of buying that pushed RBOB gasoline and Brent crude futures for fresh 4 year highs. The relatively modest pullback in prices today seems to be more technical in nature with profit taking a likely culprit, rather than a fundamental shirt with no signs of actual progress on resuming movements through the Strait of Hormuz or ending the war. Yesterday’s DOE report also offered a harsh reminder that even though the U.S. is better insulated to the supply fallout from the war than many countries, the trickle down effects on domestic supplies are unavoidable.

IF RBOB gasoline futures manage to finish in the red today, it will snap an 8 session streak of gains that has added more than 85 cents/gallon from the low trade seen on April 17. Today is also the expiration day for May RBOB and ULSD futures, with the June contracts trading 14 cents lower for RBOB and 11 cents lower for ULSD at the moment. Most cash markets have already rolled to trade against the June contract, but if you’re in the NY or Group 3 markets which are still trading vs May be sure to pay attention to the June price action today.

Worst to First: Chicago diesel basis went from the cheapest in the country on March 27th when it was trading some 90 cents below May futures, which put it more than $1.03 below the prompt April contract. Wednesday prompt ULSD in the region traded north of and 87 cent premium to June futures, making it the most expensive diesel contract in the country and even more expensive than the theoretical San Francisco CARB diesel market that has gone another week without a single bid or offer. Upsets at the region’s 2 largest refineries this week, while 2 other facilities are struggling to come back online following their turnarounds sparked the big spike which is likely to prove short-lived as pipeline options from the Gulf Coast and trucking options from neighboring markets will scramble to fill the gap until those refiners are back online.

Speaking of worst to first: Valero kicked off the refiner quarterly earnings reports this morning, highlighted by $1.8 billion in operating income for its refining segment compared to a $530 million loss in Q1 of 2025. The company’s RD segment also showed a huge reversal of fortunes with $139 million of income compared to $141 million in losses in the first quarter last year. The company also noted its phased shutdown and cessation of fuel production at its Benecia California refinery during the quarter, and took another $100 million write-down on those assets, on top of the $1.1 billion it wrote down in March of 2025. The company continues to evaluate its last remaining refinery in the state as its west coast operations are still showing negative operating income.

Given the big price swings following the winter storms in January and February and the near-record spreads in March due to the war, we expect to see similarly dramatic improvement as the rest of the refiner earnings trickle in.

Notes from the DOE’s Weekly Status Report:

Oil inventories dropped last week due the highest crude exports since the DOE began tracking it in 1991.The Strategic Petroleum Reserve dipped below April 2025 levels, which is the first time we’ve seen a YoY decrease since April 2024.

Overall refinery runs picked up last week with the exception of PADD 4 which saw a 12% drop, setting a new 5-year seasonal low, down from a seasonal highs set in February and March. We will expect to see PADD 2 runs drop next week after a rash of refinery problems plague the area: from Citgo Lemont and P66 Wood River hitting snags while restarting after turnaround to reported upsets at BP Whiting and Exxon Joliet.

Diesel demand came back into its 5-year range last week as exports set new seasonal highs for the third week in a row. Low stocks, steady demand, and high exports have pushed the days of forward cover for ULSD to 3-year lows, currently in the 3rd percentile of the measure since 2000.

Total gasoline inventories went from setting new 5-year seasonal highs last month, dipping below the 5-year average two weeks ago, to setting new seasonal lows last week.