Refined Product Prices Seem To Have Found A Temporary Floor After A Big Selloff To Start The Year

Market TalkFriday, Jan 6 2023
Pivotal Week For Price Action

Refined product prices seem to have found a temporary floor after a big selloff to start the year, leaving refined products in the middle of the trading ranges they established in December, and needing to swing at least 20 cents in either direction before breaking out and finding a new path forward. 

This morning’s rally, after trading lower overnight, comes on the heels of the December payroll report which estimated 233,000 jobs were added in the US last month, while the previous 2 months had their estimates lowered by a combined 28,000. The headline unemployment rate dropped to 3.5% while the “U-6” rate dropped to 6.5%. That report seemed to meet the “goldilocks” criteria of not too good that it will encourage the FED to keep raising rates aggressively, but not too bad to show the US economy is falling further into a recession, and was quickly followed with a round of buying in both equity and energy markets.  

It looks like we’ve dodged another supply disruption bullet:Colonial provided an update on its line 3 shutdown Thursday afternoon, saying that the leak near Danville VA has been contained to company property and a restart mid-day on Saturday is still on the schedule. That news was met with a sigh of relief from shippers and a shrug from traders, and may not even make the top 10 list of supply disruptions the industry has dealt with over the past 2 years. 

Yesterday’s DOE report showed the largest weekly drop in US petroleum demand on record, with the estimate plummeting by 20%. For gasoline it was the 2nd worst drop ever, right behind the COVID lockdown collapse, while distillates saw their 4th worst drop on record. The silver lining to those terrible demand estimates is that it coincided with the 4th biggest disruption in refining activity on record, and limited the impact of the outages that hit 4 out of the 5 PADDs.    

The big question as we start the new year is how much of that demand collapse was noise from the weekly data being influenced by so many disruptions in the middle of the holidays, how much was temporary due to the parade of winter storms keeping drivers off the road, and how much is actually a reflection of weaker economic activity. Based on the market behavior to start trading in 2023, there’s a decent amount of money being bet that it’s the latter, which could make this an excellent buying opportunity if it’s not.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Market Talk Update 01.06.2023

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Market TalkFriday, Jul 19 2024

Summertime-Friday-Apathy Trade Influencing Energy Markets

Energy markets are treading water to start the day as the Summertime-Friday-Apathy trade seems to be influencing markets around the world in the early going. RBOB futures are trying for a 3rd straight day of gains to wipe out the losses we saw to start the week, while ULSD futures continue to look like the weak link, trading lower for a 2nd day and down nearly 3 cents for the week.

Bad to worse: Exxon’s Joliet refinery remains offline with reports that repairs may take through the end of the month. On top of that long delay in restoring power to the facility, ENT reported this morning that the facility has leaked hydrogen fluoride acid gas, which is a dangerous and controversial chemical used in alkylation units. Chicago basis values continue to rally because of the extended downtime, with RBOB differentials approaching a 50-cent premium to futures, which sets wholesale prices just below the $3 mark, while ULSD has gone from the weakest in the country a month ago to the strongest today. In a sign of how soft the diesel market is over most of the US, however, the premium commanded in a distressed market is still only 2 cents above prompt futures.

The 135mb Calcasieu Refinery near Lake Charles LA has been taken offline this morning after a nearby power substation went out, and early reports suggest repairs will take about a week. There is no word yet if that power substation issue has any impacts on the nearby Citgo Lake Charles or P66 Westlake refineries.

Two tanker ships collided and caught fire off the coast of Singapore this morning. One ship was a VLCC which is the largest tanker in the world capable of carrying around 2 million barrels. The other was a smaller ship carrying “only” 300,000 barrels (roughly 12 million gallons) of naphtha. The area is known for vessels in the “dark fleet” swapping products offshore to avoid sanctions, so a collision isn’t too surprising as the vessels regularly come alongside one another, and this shouldn’t disrupt other ships from transiting the area.

That’s (not) a surprise: European auditors have determined the bloc’s green hydrogen goals are unattainable despite billions of dollars of investment, and are based on “political will” rather than analysis. Also (not) surprising, the ambitious plans to build a “next-gen” hydrogen-powered refinery near Tulsa have been delayed.

Click here to download a PDF of Today's TACenergy Market Talk.

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Market TalkThursday, Jul 18 2024

Refined Products Stanch Bleeding Despite Inventory Builds And Demand Slump

Refined products are trading slightly lower to start Thursday after they stopped the bleeding in Wednesday’s session, bouncing more than 2 cents on the day for both RBOB and ULSD, despite healthy inventory builds reported by the DOE along with a large slump in gasoline demand.

Refinery runs are still above average across the board but were pulled in PADD 3 due to the short-term impacts of Beryl. The Gulf Coast region is still outpacing the previous two years and sitting at the top end of its 5-year range as refiners in the region play an interesting game of chicken with margins, betting that someone else’s facility will end up being forced to cut rates before theirs.

Speaking of which, Exxon Joliet was reportedly still offline for a 3rd straight day following weekend thunderstorms that disrupted power to the area. Chicago RBOB basis jumped by another dime during Wednesday’s session as a result of that downtime. Still, that move is fairly pedestrian (so far) in comparison to some of the wild swings we’ve come to expect from the Windy City. IIR via Reuters reports that the facility will be offline for a week.

LA CARBOB differentials are moving in the opposite direction meanwhile as some unlucky seller(s) appear to be stuck long and wrong as gasoline stocks in PADD 5 reach their highest level since February, and held above the 5-year seasonal range for a 4th consecutive week. The 30-cent discount to August RBOB marks the biggest discount to futures since 2022.

The EIA Wednesday also highlighted its forecast for rapid growth in “Other” biofuels production like SAF and Renewable Naptha and Propane, as those producers capable of making SAF instead of RD can add an additional $.75/gallon of federal credits when the Clean Fuels Producer’s Credit takes hold next year. The agency doesn’t break out the products between the various “Other” renewable fuels, but the total projected output of 50 mb/day would amount to roughly 2% of total Jet Fuel production if it was all turned to SAF, which of course it won’t as the other products come along for the ride similar to traditional refining processes.

Click here to download a PDF of today's TACenergy Market Talk

Pivotal Week For Price Action
Market TalkWednesday, Jul 17 2024

Week 28 - US DOE Inventory Recap