Gasoline Prices Don’t Look As Bullish On The Charts With Only 3 Trading Days Left, Hurricane Franklin Reached Category 4 Status

Market TalkTuesday, Aug 29 2023
Pivotal Week For Price Action

Refined product prices came back to earth Monday after the tank fire at the Garyville LA refinery that sent prices soaring on Friday was finally extinguished with reports suggesting that no damage was done to operating units at the refinery. 

The 10-cent drop puts ULSD at risk of snapping its record-setting 9 consecutive weeks of gains, even though the trend line that’s seen prices rally nearly $1/gallon during that time is still intact at the moment.  If we see a sustained move below $3.20 for ULSD, the charts suggest we could see another 10-20 cents of downside soon as a natural correction of this big rally, but if the $3.20 range support layers hold, the door is still open to rally north of $3.50 as we head into fall.

Gasoline prices meanwhile don’t look nearly as bullish on the charts, and there are only 3 trading days left before the last summer-spec futures contract of the year goes off the board and we start the winter gasoline season.  Both the technical and seasonal factors suggest that outside of a major supply disruption, it’s more likely we’ll see RBOB trading at $2.40 soon than it is we’ll see a run at $3.

Idalia is currently a category 1 hurricane and is expected to reach category 3 status before making landfall in Florida’s big bend region overnight.  Port Tampa Bay is still at risk of flooding from storm surge which is expected to be 4-7 feet in that area, but the latest path keeps the worst parts of the storm well away from major population centers and ports, which means the impacts on supply should be localized despite the dangerous nature of this storm.  Numerous ports in Florida and further east in the Gulf Coast have begun to limit operations as the storm passes and terminals in the area are expected to close around noon today. Non-essential personnel are being moved off of oil platforms in the Gulf of Mexico, but the storm is far enough east that it shouldn’t do any damage to production or refining assets.

The other type of storm in Tampa that’s been causing all sorts of headaches for suppliers attempting to top off tanks ahead of Idalia may require an EPA waiver to allow the contaminated product to be re-loaded onto ships and sent back to a refinery rather than attempting to truck out millions of gallons of transmix, which could take months given the location and looming demand for trucks in the wake of the hurricane.

Hurricane Franklin has reached Category 4 status in a reminder of what record warm water temperatures can produce as it moves north roughly 500 miles east of Jacksonville FL this morning but is hooking east and will stay far off shore. The NHC is tracking 2 other systems in the Atlantic, both given 50% odds of being named, but both looking like they’ll also stay out to sea.

The EPA issued a waiver for El Paso’s boutique 7.0lb RVP gasoline Monday, citing unplanned outages at the Alon Big Spring and Marathon El Paso refineries that have caused fuel shortages in recent weeks. The waiver allows for 9lb RVP gasoline, or 10lb RVP if blended with ethanol, through the end of the summer-grade season ending September 16.

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Market Talk Update 08.29.2023

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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