The Energy Complex Starts Wednesday Strong: Refined Products Outpace Crude Volatility

Refined products are leading the energy complex in a strong rally to start Wednesday’s session with ULSD futures up more than 7 cents while gasoline futures trade up a nickel, breaking above the $2 mark for the first time since mid-November.

Reports that the U.S. is considering a Venezuela-style blockade of Iran’s oil tankers seems to have stirred the pot a bit overnight, helping the market shrug off a huge build in crude oil inventories but not helping to explain the relative strength in refined products. This morning reports suggest that Iran is calling off wider talks with the U.S., which suggests that more violence may be inevitable.

The API estimated a big build in crude oil stocks as production resumed following the winter storms with an increase of 13.4 million barrels reported, compared to a drawdown of 11.1 million barrels a week ago. Gasoline stocks were said to build by 3.3 million barrels last week, while distillates declined another 2 million barrels. The DOE’s weekly report is due out at its normal time today, and then will be delayed next week due to the President’s Day holiday Monday.

The EIA’s short term energy outlook made major upward revisions to its heating demand and natural gas price forecasts after a big miss in its January 13 report. It’s also worth noting that while the new forecast calls for a 24% increase in natural gas prices this year, 2027’s forecast is slightly lower as new production increases to fill the gap this year. In petroleum products the agency continues to predict lower prices ahead with WTI averaging under $50/barrel in 2027, which will push retail gasoline and diesel prices down by roughly 20 cents/gallon vs a year ago. The report predicts total diesel consumption in the U.S. will reach a record high next year, while gasoline demand will continue its slow decline, and also suggests that consumption of Renewable diesel will start to grow again the next two years after the big decline in 2025.

Speaking of challenges with government data collection: The USDA made major upward revisions to its corn harvest acres for 2025 in its latest report, which has prompted the agency to begin an internal review. Those revisions sound awfully similar to the adjustments the DOE had to make a couple years ago to figure out how much oil the country was actually producing after admitting it really wasn’t sure.

The BLS tried its best to estimate U.S. job growth in January, with this morning’s report showing 130,000 jobs created during the month, while the November and December numbers were revised lower by 17,000. The headline unemployment rate dropped by a tenth to 4.3% for the month, while the less-manipulated U-6 rate dropped 4 tenths to 8.0%.

Meanwhile the EIA’s hourly electric grid monitor shows how petroleum products once again stepped up to keep the lights and furnaces on through the weekend’s cold snap, but the diesel burn has shrunk to basically nothing this morning as warmer weather moves in and natural gas curtailments come to an end. Vessels in the region have been struggling to move with frozen rivers and channels disrupting traffic in and out of local refineries and the NY Harbor, and it’s likely to take a few more days for things to heal up and to wipe out the steep backwardation in diesel values. Another interesting note from the EIA’s grid monitor, note in the chart below how the Texas grid leans heavily on battery power during the off-hours for solar and wind generation, which is one of several reasons the grid held up much better in 2026 than it did in 2021.

Ethanol and biomass-based-diesel RIN values continue to climb higher this week reaching 2.5 year highs around $1.40 for D6 and $1.47 for D4 values. On the flip side, D3 RINs generated by renewable natural gas producers have remained stagnant as the EPA’s proposed policies don’t seem to offer much of an increase to the mandate for capturing landfill gasses.

Marathon reported an upset at its 300mb/day Cattletsburg KY refinery Tuesday night due to a power outage.

Ukraine’s drones struck the 300mb/day Lukoil refinery in Volgograd Russia overnight, the first time this year that facility has been targeted after multiple attacks last year.