Refinery Trouble And Global Conflict Keep Energy Markets Guessing

It’s been another busy morning for energy markets with big overnight gains turning to losses as the U.S. heads to the polls.

News that the U.S. Military had struck Iran overnight, and it wasn’t the first time they’d broken the President’s pledge to not attack before the mid-terms pushed prices sharply higher, wiping out a healthy portion of Monday’s big losses. The market reversed course in the past couple of hours however after the U.S. President stated a peace agreement “could happen” when asked about the new attacks, which seems to be a bit optimistic considering Iran is signaling the two sides are still a long way from an agreement despite the non-stop negotiations over the weekend.

Ukraine struck another Russian refinery overnight, its 4th strike in 5 days on refineries after taking a 2 week break. Russia did announce it was extending its diesel export “ban” through the end of January following the recent attacks, but is still carving out a quota to send barrels out that were part of the agreement with the U.S..

The UKMTO reported 2 more ship attacks near Hormuz Monday, but it appears the U.S. retaliatory strikes on Iran’s Qeshm island near the strait came after one of its planes was targeted, not in response to the ongoing ship attacks.

CVR announced it is buying 2 of Marathon’s refineries in the upper Midwest – the 105mb/day St. Paul Park MN plant, and the 72mb/day Mandan ND facility, along with the corresponding marketing business that includes 590 branded stores across the region. Trafigura is partnering with CVR on the deal contributing financing, and a long-term agreement to market the facilities’ supply.

See the table below to show how this deal looks like a bargain, or quite expensive, depending on which year’s earnings you use to calculate the multiple, and there’s also likely a heavy RIN component bet for both the buyers and sellers with CVR Noting a $253 million benefit from the EPA’s Small Refinery waivers during the quarter while its overall earnings were lackluster compared to most U.S. refiners. CVR’s earnings call is set for 9am central this AM.

Marathon’s quarterly earnings followed the expected pattern with blow out earnings from its traditional refining operations, and huge year on year improvements from its Renewables segment.

IIR is reporting that the 275mb/day Exxon Joliet refinery is back to normal operations after another upset last week that contributed to the latest spike in Chicago area basis values and rack spreads. That upset was rumored due to the price action, but the company has not reported anything to government officials or issued a statement on the matter.

P66 reported another upset at its 270mb/day Sweeny TX refinery over the weekend, but provided little detail beyond the emissions caused. Multiple units appear to have been impacted, with the end time listed as “unknown” suggesting they’re still trying to fix whatever broke.

FHR reported another upset at its 350mb/day Corpus Christi TX refinery complex with flaring from a diesel hydrotreating unit due to unknown causes.