Refined Product Markets Whipsaw On Iran Headlines And Operational Disruptions

It’s been another choppy overnight session for refined product markets with prices seeming to swing 5-10 cents in either direction based on the latest headlines about whether or not the U.S. and Iran will actually start negotiating again. Reports a couple hours ago that Iran’s FM “MAY” arrive in Pakistan seemed to be the catalyst for diesel prices to swing from 8 cent gains to 5 cent losses, but those losses were quickly erased just before 8am as it appears someone taught their trading algorithm what the world “MAY” actually means. RBOB gasoline futures hit a fresh 4 year high overnight before pulling back modestly into the red around 8am.

Buy the dip? The pattern each of the past 3 days has been some sort of a sell-off in the morning that proves short lived with prices rallying into the afternoon sessions. Yesterday’s version was highlighted by a quick rally after reports that Iran’s lead negotiator had resigned due to interference from the Republican Guard, which suggests even IF the two sides sit down this weekend, a deal may still be a long way off.

The White House announced a 90 day extension of the current Jones Act waiver. That waiver has had minimal impact on shippers so far, but the 3 month extension will continue to give domestic shippers more flexibility, particularly to try and help deal with concerns over Jet Fuel shortages in some markets even though domestic inventories are holding up in total. An Argus note Thursday highlighted how P66 had used that waiver to ship a vessel from the Gulf Coast to the East Coast, landing at the Delta Airlines (Monroe) Trainer refinery in PA, although it’s not yet clear if jet fuel was the product being shipped.

The IEA continues to sound the alarm over the long term damage being done by the war, with a new report that the agency believes global LNG supplies will not recover until the end of 2027 due to the damage done by Iran’s attacks on its neighbors, and the drawdown of inventories due to lost shipments from the strait. So far today there have not been any new reports of ship attacks or takeovers in the Strait, but vessel traffic continues to be nearly non-existent.

Perfect timing: The EIA highlighted the startup of Golden Pass LNG Export facility which shipped its first cargo this week after starting production in March. That facility is the 10th export facility in the country, and another milestone in the race to bring more export capacity to alleviate the country’s huge natural gas supply overhang and to offset the large shortage of natural gas supplies in other parts of the world. That facility sits on the TX side of the Sabine pass that marks the border with Louisiana, which is already one of the world’s most important hubs for energy supply as it facilitates movements for several of the country’s largest refineries in Pt. Arthur and Beaumont.

Speaking of which: One of those giant facilities, Exxon’s 630mb/day Beaumont facility reported an upset in an FCC unit earlier in the week. It’s unclear if the upset, which lasted 7 hours, forced the unit to shut down or slow rates, but it does offer another reminder of how complicated operating a refinery is, even when they’re not being attacked by missiles and drones.

Marathon reported an unplanned flaring event at the Carson section of its 365mb/day LA refinery due to unknown causes according to their filing with the AQMD. The issue started around 10pm local time Thursday and appears to be ongoing this morning.