Refined Product Inventories Are Down Across The Board This Week
Refined product futures settled up modestly after yesterday’s news with prompt month RBOB contracts adding 1.5 cents and HO almost flat at +.0032 cents. WTI and Brent lost $1.15 and $1.03, respectively. The small gains in gas and diesel prices were erased overnight with June RBOB down 2.8 cents and HO down around a penny. WTI and Brent are trending further down this morning, both showing 45 cent losses. The early morning movements indicate recession fears are still intact as the Group of Seven kicks off their meeting in Japan today with a question mark surrounding whether or not the US government will raise its debt ceiling.
Yesterday the EIA reported crude up almost 3 million barrels on the week as the congressionally mandated sales from the Strategic Petroleum Reserve continue. The 362 million barrels remaining in the SPR is the lowest level since October 1983 and the 26 million barrels in sales are expected to continue through the end of June this year. Crude exports fell back to the seasonal 5-year average last week, but barrels exiting the US are still outpacing last year's record setting average.
Refined product inventories are down across the board this week with each PADD reporting declines in both gas and diesel. Diesel stocks are at the low end of the 5-year range, sitting just above year ago levels when the major supply concerns began. Part of the drop can be explained by 1.8 million barrels in diesel exports and healthy bumps in demand for both products as we head into the driving season.
Refinery runs were tame in total last week adding just 10,000 b/d as increases in PADDs 4 and 5 were largely offset by a decline in the Gulf Coast. Run rates remain above average despite a still week, sitting just above year ago levels. PADD 3’s utilization rate has been steadily increasing since mid-March and has reached its highest level since last December, but as we learned last week, that number is likely to remain artificially inflated for a year since the EIA won’t be including the additional 250,000 b/d capacity out of Exxon’s Beaumont facility in their annual Refinery Capacity Report until June 2024.
The spread between Phoenix diesel rack prices and LA spot shot up from around +10 cents late February to $1.42 peak by the end of April. Current values show Phoenix rack prices still going for $1.19 over LA as diesel shortages in the Southwestern US continue to impact the Arizona market. While these spreads are still high, once rack prices start to lower against spots, the gap tends to close rapidly.
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View AllWeek 48 - US DOE Inventory Recap
The API Reported Gasoline Inventories Dropped By 898,000 Barrels Last Week
Gasoline and oil prices are attempting to rally for a 2nd straight day, a day ahead of the delayed OPEC meeting, while diesel prices are slipping back into the red following Tuesday’s strong showing.
The API reported gasoline inventories dropped by 898,000 barrels last week, crude inventories declined by 817,000 barrels while distillates saw an increase of 2.8 million barrels. Those inventory stats help explain the early increases for RBOB and WTI while ULSD is trading lower. The DOE’s weekly report is due out at its normal time this morning.
A severe storm on the Black Sea is disrupting roughly 2% of the world’s daily oil output and is getting some credit for the bounce in futures, although early reports suggest that this will be a short-lived event.
Chevron reported that its Richmond CA refinery was back online after a power outage Monday night. San Francisco spot diesel basis values rallied more than a dime Tuesday after a big drop on Monday following the news of that refinery being knocked offline.
Just a few days after Scotland’s only refinery announced it would close in 2025, Exxon touted its newest refinery expansion project in the UK Tuesday, with a video detailing how it was ramping up diesel production to reduce imports and possibly allow for SAF production down the road at its Fawley facility.
Ethanol prices continue to slump this week, reaching a 2-year low despite the bounce in gasoline prices as corn values dropped to a 3-year low, and the White House appears to be delaying efforts to shift to E15 in an election year.
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Values For Space On Colonial’s Main Gasoline Line Continue To Drop This Week
The petroleum complex continues to search for a price floor with relatively quiet price action this week suggesting some traders are going to wait and see what OPEC and Friends can decide on at their meeting Thursday.
Values for space on Colonial’s main gasoline line continue to drop this week, with trades below 10 cents/gallon after reaching a high north of 18-cents earlier in the month. Softer gasoline prices in New York seems to be driving the slide as the 2 regional refiners who had been down for extended maintenance both return to service. Diesel linespace values continue to hold north of 17-cents/gallon as East Coast stocks are holding at the low end of their seasonal range while Gulf Coast inventories are holding at average levels.
Reversal coming? Yesterday we saw basis values for San Francisco spot diesel plummet to the lowest levels of the year, but then overnight the Chevron refinery in Richmond was forced to shut several units due to a power outage which could cause those differentials to quickly find a bid if the supplier is forced to become a buyer to replace that output.
Money managers continued to reduce the net length held in crude oil contracts, with both Brent and WTI seeing long liquidation and new short positions added last week. Perhaps most notable from the weekly COT report data is that funds are continuing their counter-seasonal bets on higher gasoline prices. The net length held by large speculators for RBOB is now at its highest level since Labor Day, at a time of year when prices tend to drop due to seasonal demand weakness.
Click here to download a PDF of today's TACenergy Market Talk.