Tariff Concerns Linger And New Potential Spending Bill Sends Mixed Signals To Industries Far And Wide

Risk is falling out of fashion again Thursday as U.S. bond markets continue to act fearful, which seems to be spilling over into the energy and equity arenas once again. It’s too soon to say that this latest wave of selling will lead to another run towards sub $2 products as a similar bout of fear earlier in the week failed to sustain itself, but we’re getting closer to “rally or else” levels that could lead to sharply lower values if chart support doesn’t hold.

The regulatory rollercoaster seems to be contributing heavily to the nervous action as tariff concerns linger and the new potential spending bill sends mixed signals to industries far and wide.

RIN values were climbing again this week after last week’s rumors about a lower RFS proposal caused them to sharply pull back after reaching their highest levels in nearly 2 years. Yesterday saw D6 (ethanol) values trade north of $1.07/RIN around 1pm, only to see values offered 5 cents lower around 5pm. The lack of action in between suggests either a new proposal or rumor of one is at play again. Values continued to slide this AM with a trade at $.99 before a modest bounce with current values bid at $1.02, but the timing of the drop happening primarily yesterday afternoon rather than this morning suggests it has to do rumors coming from scheduled lobbying meetings with the EPA this week, rather than something new in the spending bill that just narrowly passed the house this morning.

New Mexico’s Environment Department made its proposal to the state’s environmental improvement board laying out more details on the Clean Transportation Fuel Program (CTFP) that was approved in March 2024. The proposed plan, set with an effective date of 2/1/2026 will now go through an open comment period over the next month with hearings set to determine if this proposal will become the final rule. The program is an LCFS look-alike with similarities to the existing programs in California, Oregon and Washington. It’s worth noting that any dyed fuels will be exempted from the program until the end of 2028 under this proposal, along with Aircraft, locomotives and military tactical vehicles.

California’s LCFS values continued to slide this week, reaching a 9 month low at around $51/credit Wednesday as the Air Resources Board plans to reinstitute tougher standards later in the year failed to impress the market that’s sitting on a record surplus of credits.

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

Crude stocks increased on another 1mm barrel build in PADD 5 holdings despite refinery runs there showing a significant increase, pushing back to average levels after spending the last 8 weeks much lower than historical norms. PADD 5 is the only region with above average crude inventories as most others hold below, particularly in PADD 2 where levels have been scraping the bottom end of the 5-year range all year. Refinery run changes were fairly tame outside of PADD 5’s build, although the increase in PADD 1 marks a new 2025 high. PADD 3 had the lone decrease for the week, but throughput rates remain above their 5-year range. With PADD 5 joining the rest of the country last week, all PADDs are now at or well above average run rates.

Gas and diesel stocks both increased on lowered demand, with the weekly estimate for diesel consumption reaching its lowest level since the first week of the year when many diesel users are still closed for business.

Total diesel inventories are at the bottom end of their typical seasonal slide but at lower levels than the past two years and have dipped below the 5-year range over the past two weeks. PADD 4 is the only region holding onto above average inventories as PADD 5, including RD readings from the latest monthly update, slid about 270k barrels to drop below average for the first time since October despite elevated imports as production continues to run below its 5-year range.

Gasoline stocks remain right at or below average everywhere except PADDs 3 & 5. Those regions are around 2mm and 3mm barrels off, respectively, with PADD 5 being ~1mm barrels below the seasonal bottom of its 5-year range despite imports hanging at 5-year highs. Gas exports were little changed on the week but have held at the high end of the 5-year range the past 3 weeks.