Refinery Runs Dipped Another 116,000 Barrels Per Day But Remain Above Seasonal Average Levels

The energy complex settled down an average of 3.6% across the board yesterday, with WTI leading the group at a $3.02 loss sending the contract back below the $70 mark. Prompt month gas and heating oil contracts lost 7.4 and ~10 cents, respectively. The losses continue this morning as fears from foreign central banks increasing rates yesterday leave recession a possibility.

The DOE reported crude stocks (excluding the SPR) drew by 3.8 million barrels, with reduced imports, a 39% increase in already high exports, and petroleum demand hitting its highest point this year. However, the market shrugged off the inventory drop, appearing to be more focused on the current foreign and future U.S. interest rate hikes that could impact demand.

Refinery runs dipped another 116,000 barrels per day but remain above seasonal average levels. The total utilization rate also declined slightly and is more in line with expectations with the newly included PADD 3 capacity reported the week prior. The EIA released their annual Refinery Capacity Report Wednesday showing an increase in U.S. refining capacity, bucking a two-year downward trend attributable to the pandemic and other disruptive factors. It’s important to keep in mind this report doesn’t include Exxon’s 250,000 b/d expansion at their Beaumont facility, which started up in March this year, because it wasn’t operable at the beginning of 2023.

Refined products showed moderate builds of 434,000 bbls of diesel and 479,000 bbls of gas, despite above average demand for both products. Gas production saw a 3.5% decline and all five PADDs are sitting well below their 5-year averages. Diesel inventories also remain below average with PADD 5 looking particularly low, although the exclusion of renewables plays a role in skewing those figures.

Tropical depression four (known as “Invest 93L” while only a tropical disturbance) is still out to sea and well east of land but strengthened into tropical storm Cindy overnight. We’re off to a hot start for hurricane season: this storm, on the heels of Bret, marks the first time in recorded history that two tropical cyclones have formed east of the Lesser Antilles islands during the month of June.

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