Expecting Gas Prices To Drop In Time For Memorial Day Weekend

Energy markets are limping lower into the holiday weekend with most Nymex contracts moving lower on the day and set for weekly losses. AAA is predicting a new record for travel in the U.S. for Memorial day weekend, and those travelers will be enjoying the lowest average gasoline prices since the COVID lockdowns of 2020.

Reports that Saudi Arabia would be pushing OPEC & Friends for a 3rd straight increase in production quotas in July is getting credit for some of the selling over the past couple of days, even though actual increases will be less than the stated goals due to countries like Kazakhstan not playing very nice and overproducing compared to their quotas. Given the country’s long term agreements with oil majors Chevron and Exxon, their ability to cut production – even when they’ve agreed to do so – is limited.

Notably in the spending bill passed by the house this week, the Clean Fuel Producer’s Credit (known by its IRS Code 45Z) is getting an extension while the expired Blender’s Tax Credit (BTC) is nowhere to be found despite some hopes it might be reinstated. The green hydrogen production credit is being eliminated along with various credits for wind and solar projects and EVs. Now we’ll have to wait and see what changes are made as the bill makes its way to the Senate.

Meanwhile, the senate has voted to remove 3 waivers previously granted to California that allowed the state to place more stringent rules than were required at the federal level. There is some question as to whether the Senate has jurisdiction to waive the waivers, but for now it appears that California’s plans to end ICE engine purchases by 2035 may get put on hold.

Valero reported unplanned flaring overnight at its Wilmington (LA area) refinery. No reason was provided for the upset. LA basis values had already been moving higher this week following upsets at the Chevron and PBF refineries in the area, so it won’t be surprising to see some more strength heading into the long weekend, if anyone needs to trade.

Exxon reported a brief upset in an FCC unit at its Beaumont TX refinery Thursday. The event, which was reportedly caused by an equipment failure only lasted 34 minutes.