Race To Restart Refineries

Market TalkThursday, Feb 25 2021
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Gasoline and diesel prices have reached fresh 1+ year highs every day so far this week, although another wave of selling has pushed prices modestly lower this morning after an overnight rally. The entire energy futures complex is in an extremely overbought condition following 4 months of price increases, so a big pullback is to be expected at some point.  

The race to restart refineries and resupply large swaths of the south that are tight on products continues, but outages are rare at this point, and mostly concentrated in the West Texas region for now. Texas did approve a temporary RVP waiver statewide through March to try and speed along resupply, adding to the TXLED diesel additive waiver approved by the EPA last week. 

Yesterday’s DOE report offered a clearer picture into how dramatic the impacts of the polar plunge were on refinery runs, crude output and total demand across the country. 

The drop in PADD 3 refinery runs last week rivaled the largest disruptions in history, but even though more refineries were impacted, the total production knocked offline was less than what we saw in 2017, 2008 and 2005, and with most plants in some phase of restart, we should see a bounce back next week. PADD 2 run rates also dropped sharply on the week as numerous plants in Kansas and Oklahoma faced power and extreme cold issues of their own. Refiners on the East and West coast weren’t directly impacted, although the disruption should allow them a nice bump in margins that’s much needed after a brutal year that has many plants on the verge of closing.

The EIA this morning highlighted the dramatic drop in natural gas production last week that contributed to both the widespread power outages, and the forced closure of so many refineries. One thing we saw after the 2005 hurricanes was that refiners got much better at preparing for hurricanes to minimize damage, and they’ll no doubt be coming up with new plans for avoiding this type of catastrophe in the future as well.

Click here to download a PDF of today's TACenergy Market Talk.

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Click here to download a PDF of today's TACenergy Market Talk.

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Market TalkThursday, Sep 28 2023

Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day

The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.

There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.

As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.

Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

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