Refined Products Continue To Drop 4th Straight Session

Refined product futures are dropping for a 4th straight session, a stretch that’s erased 12 cents from ULSD values and a dime from RBOB. In addition to the selling in futures, several spot markets have come under pressure post winter RVP transition, pushing spot gasoline prices in the Gulf Coast and Group 3 markets to around $1.85 this morning, their lowest levels since last Christmas.

Money managers were acting bullish on most energy contracts in the latest CFTC report, which was compiled as of last Tuesday’s ending positions. That means those speculators jumped in during the big rally Monday and Tuesday and are likely looking for a do-over now that prices have retreated for 4 straight sessions after that.

WTI saw its net length held by money managers rebound after touching a 20 year low the prior week, primarily driven by short covering as funds were squeezed out as prices approached $65 before retreating in the back half of the week. Combined, WTI and Brent saw 34,000 short positions covered by the large speculative category of trader last week, driving an increase of 48,840 contracts of net length.

Perhaps most notably, the European Gasoil contract has more net length held by large speculators today that it has at any point since the last week of February 2022, when Russia’s full invasion of Ukraine began. On the other side of the pond, ULSD was the only contract in the energy complex that saw a reduction in speculative length last week with a small reduction driven by 2,000 new short positions added during the week.

Hurricane Gabrielle is making its way north through the Atlantic but is not threatening the U.S. beyond the potential for rough surf potential along the East Coast this week. On Gabriell’s heels, the NHC is tracking 2 more systems, one given 70% odds of development that is following a similar path to the current hurricane and looking like a non-issue, while the other is tracking much closer to the US coast and could be headed for the SE coast if it beats the 40% odds of development its currently given.

Baker Hughes reported 2 more oil rigs active in the U.S. last week, marking a 4th straight week of increases after the count dropped to a 4 year low earlier in the summer. Colorado and Wyoming each added 2 rigs on the week, which offset declines in Texas and Louisiana. The natural gas rig count held steady at 118 for a 3rd straight week.

2 Texas refinery upsets were reported over the weekend;

Exxon had an unplanned shutdown of a hydrotreating unit at its 588mb/day Baytown TX refinery that caused flaring from 8 different stacks for around 4 hours. That refinery is the 5th largest in the country, and one of the first origin points for the Colonial pipeline so any lasting upset has the potential to influence USGC basis markets, although it remains unclear how much output will be affected by that event.

Valero reported elevated emissions at its 225mb/day Corpus Christi refinery caused by contamination of a cooling water tower. It’s unknown what caused the contamination, so the company is surveying upstream units to find the source of the presumed product leak. That facility primarily supplies the Austin and San Antonio markets along with South Texas, so it should not have any impact on USGC basis values even if it does upset production.

Sinclair’s 94mb “Parco” Refinery in Sinclair WY had a fire over the weekend, although it’s unclear what units were impacted. In addition to the traditional refining activity, that facility also houses one of the company’s 3 RD production facilities.