While Energy Futures Tick Lower Data Suggest Room For A Rise

Energy futures are ticking modestly lower to start Wednesday’s trade with losses of around a penny for refined products, snapping a 4 day winning streak that added nearly 20 cents to ULSD prices, 14 cents to RBOB and almost $6/barrel to WTI. Despite the pullback, charts are suggesting there may be more room to run higher near term as the complex tries to break out of a longer-term bear market.

ULSD futures are facing their first bit of technical resistance since rallying off of a 4 year low set on Cinco de Mayo, with the late April high of $2.2007 coming into play. A break of that resistance sets up a clear “W” pattern that suggests a reversal of the bearish trend that’s dominated the price action for most of the year, and sets up a short-term target at the pre tariff bomb high of $2.3375.

RBOB futures have a similar but less clear pattern on their charts and have already broken through the mid-layer of the “W” (if you believe such things exist) which leaves room for a run at the 2025 high of $2.3447 which was set 1 day before the tariff bomb derailed markets around the world.

OPEC lowered its global economic growth forecast in its latest monthly oil market report that was released this morning but held its estimate for oil demand steady. Most notably, the cartel lowered the outlook for US economic activity but increased the estimates for Europe after than a better than expected Q1. The cartel’s output declined in April, ahead of the expected increases announced in May and June, as losses in sanctioned countries like Venezuela and Iran offset gains from Saudi Arabia and the UAE.

The API estimated draws in refined product inventories of 3.7 million barrels of diesel and 1.4 million barrels of gasoline last week, while crude oil stocks were estimated to rise by 4.3 million barrels. The DOE’s weekly report is due out at its normal time this morning with refinery runs a key number to watch following numerous upsets last week, particularly in PADD 5.

Speaking of which, reports that Valero is easing restrictions on supply that came in the wake of last Monday’s fire at its Benicia (San Francisco area) refinery, and that Chevron was ramping up production after an unplanned shutdown at its El Segundo (LA area) after taking multiple units offline last week for unplanned repairs are putting downward pressure on basis values, although gasoline prices remain elevated vs the rest of the country.

Trouble in Pt Arthur?: Total reported upsets Friday and Monday at its 245mb/day Pt Arthur refinery and then Motiva reported an upset at its 635mb/day Pt Arthur facility yesterday. Despite the two facilities combining to make up nearly 5% of total U.S. capacity, USGC markets seemed to shrug off the news so far as PADD 3 run rates have continued above normal levels despite seeing the Lyondell Houston refinery shut for good this year.

Motiva’s refinery was also making news for good reasons Tuesday as Saudi Arabia announced plans to spend $3.4 billion to expand the facility, which is already the 2nd largest in the U.S.. The deal was announced along with numerous other investment plans announced during the U.S. President’s visit to the Middle East aimed at boosting trade agreements and OPEC output. While the details are scarce on how the facility will be expanded, some believe that the focus will be on petrochemical production not transportation fuels.