Political Roller Coaster Continues Over Trade And Tariffs

The political rollercoaster remains in full effect this week causing plenty of choppy action, although the size of the swings are muted compared to what we saw in April. Today is the last trading day for June RBOB and ULSD futures, so be sure to watch the July contracts (RBN/HON) for price direction if your region hasn’t already rolled.

Overnight gains in energy futures were wiped out for a 2nd straight day, with refined products flipping from penny gains to 2.5 cent losses around 8am central, following a social media message from the U.S. President that suggests China has violated its trade agreement with the U.S., and implying that more tariff retaliation is on the way.

24 hours ago, it looked like there would be a reprieve from the tariff tantrums, but a Federal Court ruling that blocked most of the recent unilateral trade taxes was put on hold by another federal court Thursday night. A supreme court showdown is possible on the subject, which leaves markets even more in limbo than they were before.

RIN values crumbled Thursday, reaching a fresh 2 month low after another Reuters “rumor” report on potential plans for small refinery exemption rulings on the RFS. Prices did bounce in the afternoon after some apparently read the whole article that suggests that current waivers are likely to be granted, but those that have been left in limbo for years may not get a blanket pardon as they did in the first Trump administration, which contributed to a collapse in RIN prices. This time around, according to the article, the sources of the rumors are suggesting that large refiners may be forced to make up the difference for any small refinery exemptions, after facing significant backlash from the Ag lobby when essentially all exemption requests were granted 8 years ago.

Trouble with power in Texas?

Marathon reported two upsets at its Texas City (AKA Galveston Bay) refinery Thursday, which at 631mb/day is considered the largest refinery in the U.S. Both upsets happened Wednesday afternoon/evening, with a power failure blamed for at least one of them. The upsets impacted a propylene unit, a resid deasphalting unit, and only lasted a brief time suggesting that refined product output shouldn’t be materially impacted this time.

Total reported an upset at its 238mb/day Port Arthur TX refinery caused by a loss of steam generation Wednesday night, which implies another power outage could be at play as storms swept the area.

Both of these power-related upsets come just a day after Valero reported a power failure that caused flaring at its Corpus Christi facility and offer a reminder that it doesn’t take a hurricane to disrupt operations, especially when your state is facing record electricity demand in the next several months.

Notes from the DOE’s weekly status report: See charts attached.

Crude slid on a 3mm barrel draw out of PADD 3 and a boost in exports far outweighing the increase in imports. Refinery runs were down in all 5 PADDs but are still at above average rates everywhere except PADD 5, where the increase to average last week was short lived. West Coast rates have been running below average 11 of the last 12 weeks after spending the majority of the past two years above.

Traditional diesel inventories in PADDs 2 & 5 have been dwindling for weeks and both hit 5-year lows last week, pulling total U.S. stocks down to a 5-year low as well. PADD 5 isn’t quite as low when considering renewable diesel but did drop again last week as diesel production there has fallen to an all-time low at 340 thousand barrels per day.

Despite the biggest week to week drop in exports of the year, gas stocks fell to a 2025 low as demand hit a 2025 high headed into Memorial Day weekend. That jump in demand failed to stir much buying interest Thursday as it’s widely expected that the holiday hangover effect will lead to a drop in demand in next weeks’ report.

Big draws in PADDs 1 & 2 were partially offset by a 2mm barrel increase in PADD 3 but still led to a 2.5mm barrel decrease overall. PADD 1 shed almost 3mm barrels to drop to year ago levels. PADD 2 dropped another 1.3mm barrels but has been moving downward in similar amounts since mid-March as is typical for the region from spring to summer. PADDs 3 & 4 are holding at average levels and PADD 5 remains well below the bottom end of its 5-year range as it has most of this year.