Refined Products Continue to Drop As We Head Into The Weekend

Refined products are sliding for a 3rd straight day to end the week, wiping out almost all of the healthy gains we saw Monday and Tuesday, and leaving the complex stuck in technical purgatory which suggests more sideways action to come.

The weakness in products in the back half of the week has taken the wind out of a rally in crack spreads that had pushed margins to their highest levels of the year earlier in the month. The EIA this week took a closer look at Europe’s distillate imports as the continent replaces Russian supplies and highlights the impact that has on refiner margins around the world.

The EPA’s monthly RIN generation data showed another large drop in D4 production as Biodiesel, RD and SAF plants struggle through a negative margin environment and rapidly changing regulations. The latest bit of bad news for SAF producers is that Europe is targeting U.S. SAF imports with a new tariff to try and protect its local producers. D4 RIN output dropped by 14% on the month while D6 (ethanol) RINs dropped by 2%.

More trouble in LA? Following Wednesday night’s unplanned flaring alert at the Wilmington section of its refinery, Marathon sent two separate notices of planned flaring at the Carson section of that facility. The first planned flaring event is set to start 9/24 and run 2 weeks through 10/8, while the second is planned to begin 9/28 and run 1 week through 10/5. LA CARBOB basis values rallied back 6 cents after a sharp drop earlier in the week following that news.

Pemex reported an upset at its Deer Park TX refinery that impacted its distilling unit #1 overnight Wednesday into Thursday morning. Community awareness messages posted Thursday night suggested that restart efforts were ongoing at the facility which is less than 1 year a chemical leak that killed 2 employees and injured 13 more last October.

Gabrielle is still expected to reach hurricane status over the weekend but will remain far out to sea as it starts its move north and won’t be a threat to the US. The other system being tracked by the NHC is still given just 20% odds of developing in the next week. While we’ve enjoyed an unusually quiet September for storm activity, Accuweather forecasters continue to highlight the risk of development in the Caribbean and Gulf starting late next week which could very well become a major concern as we approach month end.