Fears Of An Economic Slowdown Are Getting Much Of The Blame For The Big Sell-Off This Week

Refined products are trading lower for a 4th straight day after a heavy wave of selling Wednesday pushed gasoline futures to a 3-week low, while ULSD futures are within a penny of the lowest levels since January 2022. Fears of an economic slowdown are getting much of the blame for the big sell-off this week, with yesterday’s DOE report offering little to counter those concerns as domestic fuel consumption remains fairly soft.
While futures continue to act as though the sky is falling, physical markets across large parts of the US are telling a very different story. Space to ship gasoline on Colonial’s mainline surged to a nickel premium Wednesday as spreads between the NYH and Gulf Coast continue to widen following the transition to summer grade products in NY this week.
Markets across the US Southwest continue to see huge premiums for both gasoline and diesel and it seems like the only thing that will end that price spike is the return to service of 2 refineries in the region that are both down for extended maintenance.
Group 3 basis values jumped back up to a 20-cent premium over ULSD futures Wednesday, after pulling back sharply from abnormally strong levels earlier in the week. PADD 2 distillate stocks remains at the bottom of the 5-year seasonal range just in time for planting season and a couple of facilities still have maintenance work ongoing, which may keep prices elevated in the area for another few weeks.
The EIA’s estimate for gasoline demand saw a large decline last week, which added fuel to the gasoline fear fire that’s seen prices drop 30 cents in the past week. Refiners are also cranking up their run rates as a busy spring maintenance season starts to wind down, which is alleviating concerns about shortages in some areas, even as extreme shortages persist in others.
The EIA finally acknowledged that its weekly refining capacity figures are not including the new 250mb/day expansion of Exxon’s Beaumont facility, which is causing utilization figures to be inflated, until the capacity report is updated at the end of May.
While the White House is pressing the EPA to try and get phase 3 fuel economy standards pushed through the courts, Exxon and Chevron are offering an EV alternative with new production of renewable gasoline blends being road-tested by the majors. Both companies have also been working on technology to co-process renewable fuels at their traditional oil refineries, which would be incredibly more efficient than the shut-down conversions we’ve seen several other facilities try over the past few years.
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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.