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Winter Storm Cripples Demand Along East Coast

Tuesday, Feb 2 2021
Market Talk

Refined products are in a technical breakout to start Tuesday’s session, even as a major winter storm cripples demand along the east coast. The rally appears to be technically driven after prices bounced sharply off of trend-line support Monday, creating an outside-up bar, and following through with a strong rally overnight that is pushing prices towards one year highs.

The worst winter storm to hit parts of the east coast in five years doesn’t seem to matter to traders this morning even as it’s sure to sap transportation demand in the region over the next few days, without getting cold enough to spark a surge in heating demand. That fundamental weakness will be a good test for this rally in the back half of this week, and next when we see the inventory reports that will reflect the slowdown. The next natural resistance level looks to be the $1.68 range for RBOB and the $1.72 range for ULSD, both marking last February’s high water marks. 

Exxon reported a $20 Billion loss in the fourth quarter, as the company wrote off $19 billion in impairments in its upstream operations, “…including certain dry gas resources in the United States, western Canada, and Argentina.” The refining & downstream segment “only” lost $1.2 billion for the quarter.

Marathon reported positive earnings for Q4 with solid gains from its midstream assets, soon-to-be discontinued Speedway operations, and a billion dollar write up in inventory values helping to offset a $1.6 billion loss in their refining segment. Its Dickinson ND Renewable Diesel facility is expected to be online in the next couple of months, with a 12mb/day capacity that will head to California to earn the additional $1.50/gallon or so in LCFS credits, on top of the $1 federal Blenders tax credit. Those credits are of course on top of the RIN value.

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