Refining Margins, Tanker Attacks, And OPEC Growth Shape Energy Outlook

Gasoline prices are trying to pull the energy complex lower to start Tuesday’s session, with losses of around 7-8 cents/gallon (roughly 2%) for the front 2 months, while oil prices are down around 1%. ULSD futures have reversed course and are trading up 3 cents after dropping 8 cents overnight.

Gulf Coast oil production and refinery operations are almost back to normal after Hurricane Isaias’ near miss with most offshore production already restarted, while the Coast Guard is quickly getting the ports in the region back online.

Ukraine hasn’t hit a Russian refinery in the past few days, as they hold up their end of the “energy ceasefire” that was sprung on them this weekend, but has warned they will resume attacks if Russia continues targeting their power grid. Moscow officials meanwhile continue to avoid commenting on the topic while politicians around the world rail against the diesel deal with the devil announced Friday.

The UKMTO reported a 4th tanker was struck by a projectile in the Strait of Hormuz Monday night, marking the 7th ship that was attacked in just 2 days. The U.S. military has continued to hold off on retaliating against these strikes, making good on the promise to not attack Iran ahead of the Mid-Term elections 3 weeks from today, although they did fire on a ship over the weekend to enforce their blockade of Iran’s ports.

The Houthi’s have claimed hits on 2 Saudi oil and gas facilities along with their deadly airport attacks, but so far the Saudis aren’t confirming (or denying) any impact on those facilities.

OPEC’s monthly oil market report acknowledged that the “geopolitical tensions” in the Middle East are causing demand headwinds as prices spiked again in September, but the cartel’s PHD’s continue to paint a robust economic outlook for the year ahead.

The report highlighted the drastic difference in refining margins depending on hemisphere with U.S. plants seeing margins holding near all-time highs thanks to the abundance of crude oil in the U.S. and Canada, while Singapore refiners saw their margins crater to break even as they are having to pay high prices and astronomical freight charges to get crude.

The report See the chart below for OPEC’s count of SPR barrels by continent.

OPEC’s oil output increased by more than 900mb/day in September, with large increases from Saudi Arabia and Iraq more than offsetting declines from Iran, Kuwait and Libya. The OPEC total production climbed back above 25 million barrels/day for the first time since the war with Iran broke out in February, but the total is still more than 2 million barrels/day below pre-war levels.

Today’s interesting read courtesy of Chevron: How water depth makes a huge difference in petroleum operations.