Refinery Issues Over The Past 2 Weeks Showed Up In The DOE’s Figures With 4 Of The 5 PADDs Seeing Lower Run Rates

The weekly trend line that pushed diesel prices up nearly $1/gallon over the past 2 months broke Wednesday and sent ULSD futures tumbling.  The September futures contract, which expires today, is down 22 cents for the week so far, making it highly likely that the record-setting streak of 9 straight weekly increases is about to end, and the charts now suggest we’ll at least see an attempt to push prices back below the $3 mark soon.

While the diesel bubble has popped, oil and gasoline prices are recovering nicely with WTI actually moving higher for the week following a big decline in inventories while RBOB futures have bounced 8 cents off of their lows. Today is the last trading day for the summer-spec September RBOB contract, so there will be a big drop of around 22 cents when October takes the prompt position tomorrow. Most cash markets around the country have already rolled to trading vs the October futures, but those that haven’t are seeing differentials jump 20+ cents to offset that spread between the winter and summer grades.

The numerous refinery issues over the past 2 weeks showed up in the DOE’s figures with 4 of the 5 PADDs seeing lower run rates. PADD 2 was the exception to that rule as Midwestern refiners set a new record for run rates averaging more than 4.2 million barrels/day last week, which is more than 100% of their nameplate capacity. Those strong run rates help explain why PADD 2 is also the only region in the US with above average diesel inventories, while all others are closer to the low end of their 5-year range. Limited options to move those excess barrels also explains why ULSD in the Chicago region is trading 10-30 cents below neighboring markets.

Idalia has moved offshore as a tropical storm this morning, and it looks like the energy supply network dodged a bullet as terminal operations in the region appear to be unscathed and the EPA has issued another RVP waiver to allow higher than 9lb blends to come into the state to help with resupply. Tropical storm Jose formed overnight over the central Atlantic and the NHC is tracking 2 other systems, but none of them look to be a threat to the US so we’ll get to catch our breath for a couple of days before the peak of the season. 

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