Large Plants Shutter After Polar Plunge

Market TalkTuesday, Mar 2 2021
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It’s a quiet morning in energy markets, after a busy overnight session had petroleum futures on the verge of breaking their four-month-long bullish trend that has nearly doubled the value of some contracts. 

Refined products dropped more than three cents overnight, and WTI dropped back below $60, but all three contracts were able to bounce and are trading slightly higher this morning. The overnight sell-off just about closed the chart gap left behind by the transition from winter to summer spec gasoline for the RBOB contract, and ULSD survived its latest test of its bullish trend line, marking the first time since the end of January we’ve seen that weekly trend face a serious test.   

The refinery restarts are continuing with some of the largest plants shuttered by the polar plunge coming back online in the past several days. While those restarts are helping alleviate concerns of long term outages, it will still be weeks before we see production return to pre-storm levels, and several reported hiccups are keeping supplies tight across Texas and neighboring states for the time being. The chart below shows the dramatic change in West Texas where diesel supplies went from feast to famine since the cold snap.


Midwestern diesel values continue to spike with Group 3 values reaching their highest levels in more than four years this week as refiners scramble to replace barrels lost due to downtime of their plants, the Explorer pipeline shutting for nearly a week, or the rush to resupply Texas. It’s highly unusual for Group 3 prices to be the most expensive in the country, and is unheard of for February. The only times we’ve seen anything like this is during the fall harvest demand spike.  The best cure for high prices is high prices, and we’re already seeing deliveries into the region tick up as shippers capture a rare winter arbitrage, so that price spike may only last another few days.

Things are getting personal in the public argument between refiners CVR and Delek. CVR (fka Coffeyville resources) as a major shareholder in Delek has been taking an activist stance for some time, and now this week publically questioned the CEO of Delek’s compensation package.  Not going down without a fight, Delek responded that its performance over the past five years was more than 3X that of CVR and would reply to their request in due course. Does any of this matter to the supply network? Probably not unless CVR gets control of Delek and puts some of its refineries on the chopping block.

The latest in a growing list of refinery unit conversions: Shell announced plans to upgrade its hydrogen plant in Germany to help produce more power-to-liquid aviation fuel. Here’s why oil executives think demand for crude will continue to grow despite the rapidly changing refinery landscape.

Today’s interesting read: Why America needs more mines if its electric dreams are to become reality, and why that’s a huge problem for the “Green” energy movement. 

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

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Pivotal Week For Price Action
Market TalkThursday, Mar 28 2024

Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

Pivotal Week For Price Action
Pivotal Week For Price Action
Market TalkWednesday, Mar 27 2024

Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

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