The Energy Rally Continues With Gasoline Prices Around The Country Reaching 7-Month Highs Overnight

Market TalkWed, Apr 03, 2024
The Energy Rally Continues With Gasoline Prices Around The Country Reaching 7-Month Highs Overnight

The energy rally continues with gasoline prices around the country reaching 7-month highs overnight, while WTI broke through the $86 mark for the first time since October 23. Supply concerns seem to be outweighing demand fears this week, and charts continue to favor the extension of a spring rally that should at least test the $3 mark for gasoline.

The San Francisco Bay area is seeing the 2nd of its 5 oil refineries complete its conversion to a renewables facility in the past couple of years, which means more RD for a market that’s already flooded by new supply, and less gasoline production for a market that’s chronically short. San Francisco CARBOB basis values have spiked once again this week to premiums north of 60 cents/gallon vs RBOB futures. The LA market isn’t far behind with CARBOB basis hanging around 50 cent premiums this week. The few remaining spot markets that haven’t yet converted over to summer-grade gasoline specs are trading at steep discounts to futures, although New York Harbor differentials have rebounded more than a dime after reaching a record low last week.

Looking for a reason why diesel prices may not be able to sustain this rally? Just 2 years after the world feared a crisis over a lack of natural gas supplies in Europe, the continent emerged from winter with record inventories on hand, which has sharply reduced the demand for diesel as a supplemental heating or electricity generating fuel. It’s not just Europe that’s suddenly swimming in natural gas: parts of West Texas have seen negative prices for several weeks as limited takeaway capacity isn’t keeping up with production, despite the sharp decline in drilling.

Want another reason? The Dangote refinery is reportedly selling diesel and jet fuel as it slowly ramps up production at what would be Africa’s largest refinery if it ever reaches fully capacity, which will back up refined products into Europe, which will have trickle-down impacts on many Atlantic basin refiners.

The API reported modest inventory draws for all petroleum products last week. Crude oil saw a 2.3-million-barrel decline, diesel dropped by 2.5 million and gasoline stocks dropped by 1.4 million barrels. The EIA’s weekly report is due out at its normal time today. The agency this morning highlighted the rapid growth in ethane production and exports in the US over the past decade, as the ancillary products from the shale boom continue to drive petroleum demand even as gasoline and diesel consumption stagnate.

Maybe they’ll join the LIV tour: A Bloomberg article Tuesday reported that multiple Aramco traders in Houston staged a walkout last week after their bonuses were [surprise] less than expected following the takeover of Motiva.

The fire reported Monday at the P66 Borger refinery seriously injured 2 employees who had to be life-flighted to a hospital in Lubbock. That refinery is co-owned by Cenovus Energy, which had a fire at its Lima Ohio refinery Monday according to an Energy News Today report.

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The Energy Rally Continues With Gasoline Prices Around The Country Reaching 7-Month Highs Overnight