Record Smashing Numbers In DOE’s Status Report

Buy the dip is the theme of the week as multiple selloff attempts have all failed, holding energy futures above their bullish trend lines and keeping the door open for a rally north of $2 for refined products this spring. We saw another example overnight as three cent losses for refined products have turned into two cent gains in the past hour. Despite the bullish pattern, prices still have some work to do in order to break through the high trades set last week, and if the worst rash of refinery shutdowns ever wasn’t enough to send prices above $2, the bulls may soon be hard pressed to make an argument for what it will take to do so.

Record smashing numbers in the DOE’s weekly status report caused by the unprecedented events of the past few weeks helped prices recover from an early round of selling Wednesday. That said, in total, those events have had a relatively muted impact on most fuel prices, in large part thanks to the unprecedented events we’ve been living through for the past year.

In the 30 years that the DOE has been publishing data, U.S. refinery utilization had never dropped below 66% of capacity. Last week, it dropped to 56% as the data caught up to the most widespread refinery disruption event in history. That drop, coupled with a surge in imports, created the largest crude oil build on record, and the largest drawdown in gasoline stocks, and yet prices were only able to manage a modest rally. For comparison, when utilization dipped below 70% following hurricanes Katrina (2005) and Ike (2008) we saw price increases of $1-$2/gallon in many markets. Today, even though utilization just smashed its record low, most markets are still trading below $2/gallon, and outages have been largely contained to small pockets of the country thanks to major refinery capacity expansions in the past 15 years and the sluggish demand caused by COVID shutdowns.

Diesel and premium UNL continue to be the biggest supply challenges as the refinery restarts continue their painfully slow process, although outages are proving to be short lived in most instances. Group 3 ULSD continues to be the standout for price action, surging to 30 cent premiums to ULSD futures as inventories in the region approach historic lows and resupplies are pulled to neighboring markets.

The OPEC & friends meeting is ongoing and so far there’s been little official word of what the official decision will be, leaving most of the market guessing on what the outcome will be today, or if there will even be an official announcement at all.

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