Gasoline Prices Are Trying To Lead The Energy Complex Higher To Start November Trading

Gasoline prices are trying to lead the energy complex higher to start November trading, after the complex ended an otherwise strong October with a thud.  

Don’t adjust your dial, if you’re looking at a continuous futures chart you’re going to see huge drops in RBOB and ULSD values today as December contracts take over the prompt spot some 20-50 cents lower than where November contracts expired, but cash markets are actually moving modestly higher to start the day.

How much did diesel prices drop yesterday? Depends on who you ask. The two major spot market pricing agencies valued ULSD in New York harbor 20 cents apart from one another, as a lack of spot market trading during the day left their reporters guessing how far down the incredibly steep backwardation curve to mark those barrels. It’s not uncommon to see a difference of 2 to 3 cents between postings, particularly on the last day of a month, but a 20 cent difference is a sign of how uncertain this market has become.

Ethanol RINs reached a 16 month high Wednesday as grain and ethanol prices jumped as it looked like the Black Sea neutral zone for shipping may be coming to an end, and as expectations for more imports into the US grow particularly with East Coast prices holding at levels high enough to attract barrels from overseas. The EPA’s court-mandated deadline to propose blending targets for 2023 is November 16, and significant changes, which may include adding renewable electricity generation to the RIN pool are expected now that the RFS program has moved beyond the original congressional mandates through 2022.

The US President Monday accused oil companies of “War Profiteering” and threatened to levy higher taxes on their excess profits. The threats sounded empty, and seem to have been largely ignored by the industry given that they’ll need congressional approval which appears to be a long shot, even before next week’s elections. Then again, there’s a renewable fuel standard about to be sent to the President for approval in 2 weeks, which could be a relatively easy way to stick it to the refiners who have benefitted the most from the rise in prices, whereas oil prices themselves are still trading at levels we saw in January, before the war began. 

Speaking of which, Marathon and P66 joined the other refiners in reporting a surge in earnings during Q3 as demand recovered and crack spreads held near record territory. Run rates were high for both companies, as we’ve seen for most US refiners in the past quarter, although it seems like both might be wanting a do-over on shutting down some of their plants over the past couple of years.

Tropical Storm Lisa may become a hurricane tomorrow as it heads towards Belize, but is no threat to energy infrastructure. Another potential system is churning in the North Atlantic, and is given 90% odds of being named this week. That storm doesn’t appear to be a land threat as it’s moving away from the East Coast, but could further slow the movement of ships that have already seen weather delays contributing to tight supplies in the region.

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