Today Is The Last Trading Day For March RBOB And ULSD Contracts
Gasoline prices are leading the energy complex in another rally Tuesday as refinery issues around the country, on top of an already busy maintenance season have some traders acting like the respite in supply disruptions we’ve become accustomed to over the past year may be coming to an end. While diesel prices have been leading the action for most of the past year, we’re now in the window of the annual spring gasoline rally so it won’t be surprising to see RBOB take the lead more often over the next several weeks.
Today is the last trading day for March RBOB and ULSD contracts. Most regional markets have already transitioned to trading vs the April contracts, but the NYH and Group spots will change today, so watch the RBJ and HOJ contracts for direction today if you haven’t already made the switch. Tomorrow will no doubt create confusion, as it does every year, when the April RBOB contract takes over the prompt position as it is trading at a 20+ cent premium to March futures due to the change in RVP specifications between the contracts and wreaking havoc on basis and rack spreads due to the mismatched timing of pipeline, terminal and retail transitions to summer-grade fuels.
More coast to coast winter storms are keeping drivers off the roads in parts of the country, while the risk of power outage and wind damage will keep some refinery operators on edge for the rest of the week. There were at least 3 different refinery issues talked on the West Coast Monday, and while it’s hard to assess what may be storm related, and what has to do with ongoing spring maintenance, the strong reaction in gasoline basis values left no doubt that traders see a sudden reduction in supply. Both LA and San Francisco spots rallied to 4 month highs Monday, with SF CARBOB values leading the way trading at a 55-cent premium to April futures.
The gulf coast also had several reported hiccups at refineries, with plants in Pasadena, Deer Park, Big Spring and Baton Rouge all said to be dealing with unplanned issues. So far Gulf Coast basis markets are largely shrugging off that news with little change in either gasoline or diesel values.
The EIA took a closer look at the impacts of the Suncor refinery downtime this winter, noting the regional price increases while most of the US was enjoying lower prices. That facility has been in the process of restarting some units over the past couple of weeks, and has been producing some fuel, although there have been numerous leaks and delays along the way. Markets for space on Magellan’s mountain line are still being talked at double digit premiums as suppliers believe it will take at least another month for supplies to heal, but those values are down 40-50 cents from their peak in January.
A suspected drone attack started a fire near a Russian refinery on the coast of the black sea overnight. Given the location of the facility, and the immediate threats to not spread “Fake information”, we’ll probably never know the real cause or effect of this latest attack on Russian energy infrastructure.
Click here to download a PDF of today's TACenergy Market Talk.
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Energy Prices Up Over 2% Across The Board This Morning
Refined product futures traded in an 8-10 cent range yesterday with prompt heating oil settling up ~6 cents and RBOB ending up about flat. Oil prices clawed back some of the losses taken in the first two full trading days of the week, putting the price per barrel for US crude back over the $70 mark. Prices are up just over 2% across the board this morning, signifying confidence after the Senate passed the bipartisan debt ceiling bill last night.
The EIA reported crude oil inventories up 4.5 million barrels last week, aided by above-average imports, weakened demand, and a sizeable increase to their adjustment factor. The Strategic Petroleum Reserve continues to release weekly through June and the 355 million barrels remaining in the SPR is now at a low not seen since September 1983. Exports increased again on the week and continue to run well above last year’s record-setting levels through the front half of the year. Refinery runs and utilization rates have increased to their highest points this year, both sitting just above year-ago rates.
Diesel stocks continue to hover around the low end of the 5-year range set in 2022, reporting a build of about half of what yesterday’s API data showed. Most PADDs saw modest increases last week but all are sitting far below average levels. Distillate imports show 3 weeks of growth trending along the seasonal average line, while 3.7 million barrels leaving the US last week made it the largest increase in exports for the year. Gasoline inventories reported a small decline on the week, also being affected by the largest jump in exports this year, leaving it under the 5-year range for the 11th consecutive week. Demand for both products dwindled last week; however, gas is still comfortably above average despite the drop.
The sentiment surrounding OPEC+’s upcoming meeting is they’re not likely to extend oil supply cuts, despite prices falling early in the week. OPEC+ is responsible for a significant portion of global crude oil production and its policy decisions can have a major impact on prices. Some members of OPEC+ have voluntarily cut production since April due to a waning economic outlook, but the group is not expected to take further action next week.
Click here to download a PDF of today's TACenergy Market Talk
Prices Are Mixed This Morning As The Potential Halt In U.S. Interest Rate Hikes
Bearish headlines pushed refined products and crude futures down again yesterday. Prompt RBOB closed the month at $2.5599 and HO at $2.2596 with WTI dropping another $1.37 to $68.09 and Brent losing 88 cents. Prices are mixed this morning as the potential halt in U.S. interest rate hikes and the House passing of the US debt ceiling bill balanced the impact of rising inventories and mixed demand signals from China.
The American Petroleum Institute reported crude builds of 5.2 million barrels countering expectations of a draw. Likewise, refined product inventories missed expectations and were also reported to be up last week with gasoline adding 1.891 million barrels and diesel stocks rising 1.849 million barrels. The market briefly attempted a push higher but ultimately settled with losses following the reported supply increases implying weaker than anticipated demand. The EIA will publish its report at 10am this morning.
LyondellBasell announced plans yesterday to delay closing of their Houston refinery, originally scheduled to shut operations by the end of this year, through Q1 2025. The company “remains committed to ceasing operation of its oil refining business” but the 289,000 b/d facility remaining online longer than expected will likely have market watchers adjusting this capacity back into their balance estimates.
Side note: there is still an ongoing war between Russia and Ukraine. Two oil refineries located east of Russia's major oil export terminals were targeted by drone attacks. The Afipsky refinery’s 37,000 b/d crude distillation unit was struck yesterday, igniting a massive fire that was later extinguished while the other facility avoided any damage. The attacks are part of a series of intensified drone strikes on Russian oil pipelines. Refineries in Russia have been frequently targeted by drones since the start of the military operation in Ukraine in February 2022.