Monday Marked The Largest Percentage Drop Since The Chaotic Summer Of 2022 For WTI

Energy futures are trying to find a floor after the biggest daily sell-off of the year Monday following Israel’s “restrained” attacks on Iran Friday night. Refined products were trading up 2.5 cents overnight but have given back half of those gains heading as we approach 8am central, while crude oil contracts are up about 75 cents in the early going.

Monday marked the largest percentage drop since the chaotic summer of 2022 for WTI, while the 11 cent drop products marked the largest daily decline of the year for diesel and 2nd largest for RBOB gasoline futures. The big slide leaves the door open for more selling on the charts, with September’s lows the natural target in the coming weeks.

Cash markets were largely quiet on the day, which is common with big moves on the Nymex that turn physical traders into screen watchers, but any signs of opportunistic buying from the big physical players were notably absent.

Group 3 diesel prices dipped below $2.02/gallon Monday, their lowest outright value since 2001, as the fall harvest season has largely passed without the October basis bump we’ve seen the past couple of years. With mid-continent basis values already trading below their Gulf Coast counterparts, and refinery runs cranking up again after fall maintenance, it’s looking like another long winter for land-locked refiners who need to push their products to neighboring markets to stay balanced.

The drop in prices should end up being good news for the Department of Energy as they continue their very slow replenishment of the SPR, announcing another 3 million barrel RFP Monday for April and May of 2025. At the current pace, it will take more than 6 years to replenish the barrels released during the supply panic a few years ago, but it’s also worth noting that in terms of days of imports, the SPR does not need to be nearly as big as it used to be thanks to the rapid growth in US production.

BP and P66 released their 3rd quarter earnings this morning, continuing the expected trend of sharply lower profits compared to the past couple of years.

P66 reported a loss of $108 million in its refinery segment during the quarter, compared to $1.7 billion in profits during the 3rd quarter of 2023. The renewable fuels segment lost even more money than traditional refining, reporting a $116 million hit in just 3 months, compared to $22 million in profits a year ago. The P66 earnings release also noted the $605 million legal judgment against the company and a $41 million impairment for the upcoming closure of their LA-area refining complex they announced would happen next year. The company said it had met its cost-savings targets without mentioning the large number of long-term employees who were let go during the quarter.

BP’s upstream earnings helped it to absorb the big drop in refining margins, but expects those margins to remain challenged due to narrower North American heavy crude differentials. The company also noted it expects a heavy turnaround schedule in Q4. Similar to P66, BP took a large impairment in its earnings due to the planned reduction in output at its refinery in Germany and also noted that it had paused its investment in several biofuel projects due to the weak margin environment.

The EIA this morning published a comparison of US energy production vs consumption over the past 50 years, highlighting the nation’s transition from net importer to exporter.

The National Hurricane Center is tracking a potential storm in the Caribbean that is given 40% odds of developing in the next week. The good news is that the late-season patterns look like they’ll move this storm east over the Atlantic instead of north towards the US.

P66 reported a brief upset at its Borger TX refinery Monday morning in an FCC unit. The upset was brief and it’s unclear if operations were forced to slow as a result.