US Oil Production Expected To Hold Steady Near Record High Levels

After a 1 day break, RBOB gasoline futures are back trying to lead the energy complex higher Wednesday, even though cash markets around the U.S. aren’t buying into the latest rally attempt.

Chicago gasoline prices are approaching a 2 year low this week, with plunging basis differentials offsetting the rally in futures, even though prices in the neighboring Group 3 market have staged a 15 cent bounce since reaching their lowest levels of the year last week.

Los Angeles Basis differentials also saw heavy selling Tuesday as it appears that Chevron will be able to restart most units at its El Segundo refinery and there are more than enough imports lined up as the market had been planning for 6+ months to deal with the shutdown of the P66 Wilmington facility. Diesel differentials completed a 15 cent round trip from 5 cent premiums last week to 20 cents back to 5 in the past 4 trading sessions as the fears of shortages have rapidly subsided. CARBOB gasoline differentials have dropped by more than a dime and neighboring market prices are falling in sympathy.

The EIA’s hired analysts made a bold prediction that WTI prices would average $49/barrel next year in the latest Short Term Energy Outlook. That sharp drop in prices is predicated on global supplies continuing to grow while demand growth will slow as China’s oil stockpiling winds down. U.S. oil production is expected to hold steady near its current record high levels despite the major slowdown in drilling activity over the past year as prices have dropped.

The STEO also highlighted how the U.S. will adapt to the loss of 2 more refineries in the coming months, suggesting that California will simply switch to increasing its product imports and reduce its oil imports to adjust. Renewable Diesel production is also forecast to increase in 2026, although the major changes in trade and regulatory policies this year will push the country to be a net exporter of biofuels instead of a net importer as it had been for the previous decade. The agency is also predicting a cooler Q4 this year than last which it expects to drive a 9% increase in heating degree days for the quarter and 3% for the winter season in total. The full winter fuels outlook will be published next week.

The EIA’s weekly status report is due out at its normal time this morning as the agency continues to publish on schedule despite the government shutdown, even while the CFTC, BLS and others have stopped publications.

Tropical storm Jerry was named yesterday but will stay well offshore as it moves north and will not threaten the US. The NHC continues to track another system in the Bay of Campeche, but it still is only given a 10% chance of developing.

Lastly, good news for all those who have been wondering about the stolen Dino in LA.