Big Story Out Of Washington Snaps Refined Product Winning Streak
Oil prices are holding steady, while refined products are facing modest selling pressure to start the week. The OPEC & friends meeting that officially kicks off Thursday should be the major price-driving story this week, after a big story out of Washington snapped the refined product winning streak on Friday.
RIN values traded up nearly a dime early Friday morning but fell sharply after the Supreme Court ruled in favor of small refiners seeking exemptions to the RFS, overturning a lower court ruling. D6 values reached $1.74 prior to the ruling, and ended the day trading around $1.48. Since the high/low range for the day was so large, most reporting agencies showed only small changes on the day, but should catch up with the larger downward move today, unless of course the RIN rollercoaster cranks back up.
Refined products saw a bit of a flash crash in the wake of the news, with RBOB prices dropping 8 cents in 5 minutes following the report, after reaching a 7 year high earlier in the day, only to quickly recover those losses as cooler heads trading algorithms prevailed. It’s important to note that while the ruling opens the door for refiners to petition the EPA for a waiver, the agency still gets to determine which plants qualify, which helps explain why RIN values – while lower on the day – remain at historically high levels.
The EIA’s refining capacity report showed total throughput capability in the US dropped nearly 5% last year, the largest drop since the great recession as plants struggled to survive the demand collapse caused by COVID lockdowns. The Supreme Court ruling on small refinery waivers may help prevent this list from continuing to grow in 2021 since the RVO nearing $10/barrel this year could certainly be the difference between profitability and insolvency for several facilities.
The U.S. launched air strikes on Iranian-backed militia in Iraq and Syria over the weekend. So far, there has not been further escalation from the attacks labeled as “self-defense” but they certainly don’t seem to be moving the parties closer to one another in the ongoing nuclear treaty negotiations.
A storm system off of the South Carolina coast is given 70% odds of development this week, but should reach land in the next day or two, preventing it from strengthening too much. It also happens to be in an area without any refineries, so should not be a supply disrupter except for traffic in the Charleston and Savannah port areas. The storm system moving across the Atlantic is now given 40% odds of development this week, although it still looks like a long shot to get into the Gulf of Mexico where it would become a supply threat.
Click here to download a PDF of today's TACenergy Market Talk.
Latest Posts
Week 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
After Another Black Friday Selloff Pushed Energy Futures Sharply Lower In Last Week’s Holiday-Shortened Trading
Social Media
News & Views
View All
Week 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Gasoline and oil prices are attempting to rally for a 2nd straight day, a day ahead of the delayed OPEC meeting, while diesel prices are slipping back into the red following Tuesday’s strong showing.
The API reported gasoline inventories dropped by 898,000 barrels last week, crude inventories declined by 817,000 barrels while distillates saw an increase of 2.8 million barrels. Those inventory stats help explain the early increases for RBOB and WTI while ULSD is trading lower. The DOE’s weekly report is due out at its normal time this morning.
A severe storm on the Black Sea is disrupting roughly 2% of the world’s daily oil output and is getting some credit for the bounce in futures, although early reports suggest that this will be a short-lived event.
Chevron reported that its Richmond CA refinery was back online after a power outage Monday night. San Francisco spot diesel basis values rallied more than a dime Tuesday after a big drop on Monday following the news of that refinery being knocked offline.
Just a few days after Scotland’s only refinery announced it would close in 2025, Exxon touted its newest refinery expansion project in the UK Tuesday, with a video detailing how it was ramping up diesel production to reduce imports and possibly allow for SAF production down the road at its Fawley facility.
Ethanol prices continue to slump this week, reaching a 2-year low despite the bounce in gasoline prices as corn values dropped to a 3-year low, and the White House appears to be delaying efforts to shift to E15 in an election year.
Click here to download a PDF of today's TACenergy Market Talk.
Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.