Another Day, Another 60 Cent Swing In Diesel Prices

Market TalkWednesday, Mar 9 2022
Pivotal Week For Price Action

Another day, another 60 cent swing in diesel prices. Last week, ULSD futures set a record with a 34 cent price increase and a 45 cent trading range in 1 day, and this week, we’ve already seen a 51 cent increase followed by an 60 cent drop this AM. To put that in perspective, there had only been 3 months since 1999 that have experienced a 70 cent trading range, and we’ve already had an 87 cent swing this morning.  

Gasoline futures haven’t been quite as volatile as ULSD, but still the past 7 trading days all rank in the top 10 all time for biggest swings on the gasoline contract.  West Coast physical gasoline has surged well beyond futures as a rash of new refinery hiccups, and the loss of a crude import option from Eastern Siberia seemed to combine Tuesday to send spot values north of $4/gallon, nearly 80 cents above priced in the middle of the country.

While East Coast gasoline prices are 50 cents or more below their West Coast cousins, there have been multiple terminal outages reported in the past 24 hours as cargoes destined for the US have been diverted to Europe, putting strain on the NYH barge system. These extremes on the coasts create the first real test for US consumers that have railed against receiving Russian crude and product imports, and now are getting their wish.

The API reported a large decline in US diesel inventories last week of nearly 5.5 million barrel, which seemed to help ULSD continue surging to a fresh all-time high late Tuesday afternoon, but is an afterthought this morning as diesel prices now are experiencing their biggest single day drop in history (47 cents) 1 day after they experienced their biggest daily increase of 51 cents. The DOE weekly report will be released at its normal time this morning, and you’ll be forgiven if you don’t pay attention to it.

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Market Talk Update 3.9.22

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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.

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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