Entire Pipeline System Operational Again

Market TalkFriday, May 14 2021
Pivotal Week For Price Action

Colonial pipeline initiated a full restart Wednesday afternoon, and Thursday confirmed that its entire pipeline system was operational again and all markets were receiving product. The pipeline is running 5.5 days behind on average. After numerous reports guessing that Colonial did not pay the hacker’s a ransom, new reports Thursday said they did, and that the ransom was relatively low because the hackers realized they’d outkicked their coverage on this deal.

It will take another week or two to put the physical supply disruption that started a week ago today in the rear view mirror, but the futures market seems to have already moved on to other things after giving back all of the price gains it had accumulated since the shutdown during Thursday’s trading.

While most of the focus this week has been on the East Coast, the real price action has been in the West Coast, as basis values have been hammered lower, bringing spot differentials for gasoline in LA to their lowest levels in a year. Rising gasoline production in Southern California may deserve some of the credit for the move, but inventories remain near the low end of the seasonal ranges, so it doesn’t appear to be the whole story.   


The Mississippi river is to U.S. grain products as the Colonial pipeline is to refined fuels. The temporary shutdown of river traffic to address damage to the I-40 bridge in Memphis, which has stranded hundreds of barges, sparked a limit-down move in several grain contracts Wednesday. Similar to the Colonial shutdown, the impacts of this shutdown are expected to be short lived, but based on what we saw earlier this week that may not be enough to prevent hoarding of bourbon and frosted flakes. The shut down of river traffic could also cause some refined product tightness for the handful of terminals north of Memphis that are fed via barge from origin points south of the closure.

RIN values did see some relatively modest selling pressure as grain and fuel prices were both taking big steps lower, but given the 60 cent increases in the past month, a drop of a few cents hardly moves the needle. Given the dramatic increases, we won’t need to wait long to see if this selling is the start of the end for the upward trend, or if it’s just a speedbump on the move towards $2/RIN.

For the second time in 10 years, an attempt by Platts to buy OPIS has been rejected by regulators that don’t want to allow more pricing index manipulation monopolization by the companies. 

Today’s interesting read: Why a review of the TX property tax code over the next 2 years may make refining expansion projects a challenge down the road.

Another change coming to the refining landscape: Soybeans are becoming the new crude oil

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

TACenergy MarketTalk 051421

News & Views

View All
Market Talk Updates - Social Header
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.

Market Talk Updates - Social Header
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