Refined Product Prices Drifting Lower This Morning

Refined product prices are drifting lower this morning, contrasted by the albeit tepid buying seen in the American and European crude oil futures markets. The prospect of China implementing an economic stimulus policy is being cited for keeping WTI and Brent futures in the green so far today.

The Department of Energy yesterday reported a small draw in crude oil inventories despite lower refinery runs and imports topping annual highs along with strong exports and demand. Gasoline inventories saw the largest move, drawing down 1.1 million barrels last week while diesel stocks built by just 13,000 barrels.

The EIA’s latest publication highlights the intrigue surrounding the production and consumption of renewable diesel in the U.S.. While California makes up over 99% of the nation’s RD consumption (the <1% is Oregon), a very small percentage of the product is actually made there. Unsurprisingly the demand for renewable diesel, which is chemically equivalent to regular ULSD, picked up due to the state’s Low Carbon Fuel Standard which offers hefty tax avoidance on renewable fuels. While this remained a West Coast phenomenon through 2021, we expect renewable fuels to proliferate as more states adopt environmentally-conscious policies, like WA implemented this year.

It has been All Quiet on the Atlantic Front for the past couple of weeks, but there are early signs of a potential storm brewing off the west coast of Africa. It’s only got a 20% chance of developing in the next week, but it’s position and projected path are right in line with the major hurricanes we’ve witnessed in the last few years, especially those that have made landfall on the U.S. mainland.  

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