Refinery Outages, Regional Price Gaps, And The New Realities Of US Fuel Markets

It’s another mixed bag for energy markets Tuesday with ULSD futures once again trying to push lower while oil prices make modest gains and RBOB futures hover around break even.

Gasoline prices are widely varied across the country with more than $1/gallon spreads between the mid-continent, which is seeing heavy discounts during the winter demand doldrums, and the West Coast where prices are spiking as the region deals with yet another refinery closure. That phenomenon sums up the reason why a handful of refineries in the Group 3 market are attempting to partner with Kinder Morgan to push barrels from IL, KS, OK and TX all the way to California with the proposed “Western Gateway” pipeline system. The 2nd open season for that line is underway, and the project website shows that several new origin points, including the Explorer pipeline have been added to the proposed system map. If approved and funded, that line could begin operations as soon as 2029.

The Group 3 market saw the heaviest selling Monday that pushed differentials to a 45 cent discount to futures, but may see a pause in that drop after Valero reported a fire at its 90mb/day Ardmore OK refinery with 5 workers sent to the hospital Monday evening. It’s unclear what impact the fire had on operating units, but the loading rack at the facility was reportedly shut down overnight for unplanned repairs.

Meanwhile, reports that the 300mb/day Bayway NJ refinery owned by P66 had a cold-related upset over the weekend seemed to be shrugged off by cash markets with NYH RBOB basis dipping on the day while diesel diffs held steady. We already saw a healthy drop in PADD 1 refinery runs last week, some of which was likely due to disruptions from freezing rivers in the area slowing shipments, but with above-average temperatures ahead, those plants should be able to ramp back up quickly.

US Military forces seized another shadow fleet tanker Monday, this one in the Indian ocean after pursuing the “shadow fleet” vessel for more than a month since it left Venezuela. India’s coast guard separately detained 3 different shadow fleet tankers alleged to be hauling sanctioned oil for Iran, in another show of cooperation with the US.

Here’s an interesting read on the challenges faced as Utah races to keep pace with data center electricity demand, a story that seems to be playing out across the US. The US National Petroleum Council highlighted these challenges in a report published last December, and we’re seeing real world examples play out ever since the cold snap forced grid operators and data centers to supplement their production with diesel fuel.

Speaking of which, in the “you can’t make this up” category, a recent social media post highlighted Wyoming’s struggle to keep its wind mills supplied with diesel fuel.

The EIA Monday highlighted the large drop in EV sales following the expiration of the federal tax credit in September. Hybrid electric vehicle sales continued to climb, making up nearly 13% of new car sales, marking an all time high.

A new report estimated the cost of Ukraine’s drone strikes on Russian refineries based on insurance filings with direct expenses of more than $1.3 billion, and indirect losses of more than $12 billion as run rates dropped to a 15 year low.