Sudden Price Reversal Ending Thursday’s Trading Session With Modest Gains

It’s a mixed bag for energy markets as RBOB and ULSD contracts face an expiration day, heading into a holiday weekend, and another highly unusual trade in Dallas once again overshadows trading in other markets.

Thursday’s session was highlighted by a sudden price reversal in the last hour of trade, with most contracts moving from modest losses to modest gains. The standout was the September RBOB contract that rallied 9 cents in an hour. Ordinarily it would be easy to shrug off that type of diva move as simply a consequence of low liquidity in an expiring contract but prompt NYH basis values for RBOB also rallied more than 4 cents on the day suggesting there was an upset at an East Coast refinery, although news on any event has been scarce so far.

Some pointed to upcoming maintenance at Irving Oil’s refinery in New Brunswick, but that maintenance has been planned for months and publicized previously so it shouldn’t have caught the market by surprise. There have also been short term supply disruptions caused by weather-related vessel delays in the area which could be contributing to the squeeze as suppliers wind down their inventory of summer-grade gasoline ahead of the RVP transition in 2.5 weeks.

Whatever the cause, the September contract is up another 5.5 cents this morning and is the only contract still in the green as the other RBOB and all of the ULSD contracts tick modestly lower. Pretty much no one in the cash markets will be paying attention as almost all have already been trading against the October reference months.

California meanwhile continues to make plenty of headlines with its refineries. Yesterday reports suggested P66 is planning to start wind-down operations at its 139mb/day Wilmington (Los Angeles area) refinery next week so that it will be fully idle by Q4. Meanwhile, the state’s energy commission realized now was not a good time to attempt a margin cap on refiners and voted to delay implementing that plan for at least 5 years. In addition, Energy News Today is reporting that the PBF Torrance refinery had a “massive” leak of hydrofluoric acid that forces a shutdown of the alkylation unit at the facility. Gasoline basis values in the region had been falling this week after a previous upset at the facility seemed to have been resolved, by may reverse course if that news is confirmed.

In addition, given the highly toxic and controversial nature of hydrofluoric acid use in refineries, expect this to become a hot button topic for regulators and the local community if the spill is confirmed.

The EIA this morning highlighted a 5% drop year on year in gasoline prices heading into the Labor Day weekend. Of course, drivers on the West Coast continue to pay $1/gallon more than most other regions thanks to their unique combination of high taxes and misguided programs that push suppliers away from their states.

The tropical wave moving off the African coast this week is now given 30% odds of being named in the next 7 days. The potential development area seems to be shifting a bit north making it less likely to be a U.S. land threat, but we’ll have to keep an eye on it for at least a few more days.