Refining Issues Across US And Europe Spur Continued Rally For Energy Markets

The rally in energy markets continues for a 2nd day, although prices are still below the levels we saw 24 hours ago and haven’t yet broken the downward trend lines on the short-term charts. We’ll need to see both RBOB and ULSD futures break and hold above the $2.10 range to confirm the bulls are serious about this rally, or it will look like just a bit of choppy action in a market stuck in a larger sideways range.

A rash of refinery issues stretching across the U.S. and Europe are seeming to help encourage the rally, in addition to the threat of more intense sanctions from the U.S. and Europe on Russia’s energy exports. Those stories and what appears to be some good old fashioned short covering by large speculators who picked a bad time to bet on even lower energy prices all seem to be enough for the market to temporarily ignore the added supply coming to the market courtesy of OPEC.

Read this article from the FT on a more in depth look at the recent history of the production agreements between OPEC & Friends, and some guesses on what may be coming next.

RIN prices continued their slide Monday, reaching their lowest levels in 2 months after the DOE published new guidance on the 45Z tax credit carbon intensity modeling that’s more favorable to producers, specifically wet-mill corn ethanol facilities that will likely boost production in the coming years.

The EIA Tuesday highlighted the critical role the Permian basin has played in the record setting growth of U.S. oil production in the past decade, while other U.S. basins have been essentially flat. That reality is also highlighted by the weekly Baker Hughes rig count showing that roughly 60% of all drilling activity is happening in the Permian. More specifically, the Wolf camp play within the Permian has accounted for the majority of the growth, producing 3.4 million barrels per day of oil in 2024. The report does not mention the coinciding rapid growth in “other” petroleum liquids that come along with oil production and have been an underreported story that has helped the U.S. go from the world’s largest buyer of petroleum 20 years ago to its largest seller the past couple of years.

PBF continues to make repairs at its 190mb/day Delaware City refinery after a boiler failure caused an upset last week. Reports Monday suggested the facility would need another 2 weeks for repairs to be completed. That upset has done little to stir basis values in the NY Harbor, and line-space values for shipping gasoline along Colonial’s line 1 have dropped back into negative territory over the past few days, suggesting traders on the East Coast aren’t too worried about the issues at Del City.

Reuters via Wood Mackenzie is reporting that BP’s 400mb/day Rotterdam refinery has both of its crude units offline, as one was closed due to an unplanned event while the other is ongoing extended maintenance.

The National Hurricane Center is tracking its first potential storm system of the Atlantic Hurricane Season, giving 10% odds of development to a system moving off the East Coast of Florida, heading towards the Carolinas. While this system is given very low odds of being named, it is expected to bring heavy rains to south Florida, with some spots expected to get 8-12 inches of rain.