Refinery Issues Over The Past 2 Weeks Showed Up In The DOE’s Figures With 4 Of The 5 PADDs Seeing Lower Run Rates

Market TalkThursday, Aug 31 2023
Pivotal Week For Price Action

The weekly trend line that pushed diesel prices up nearly $1/gallon over the past 2 months broke Wednesday and sent ULSD futures tumbling.  The September futures contract, which expires today, is down 22 cents for the week so far, making it highly likely that the record-setting streak of 9 straight weekly increases is about to end, and the charts now suggest we’ll at least see an attempt to push prices back below the $3 mark soon.

While the diesel bubble has popped, oil and gasoline prices are recovering nicely with WTI actually moving higher for the week following a big decline in inventories while RBOB futures have bounced 8 cents off of their lows. Today is the last trading day for the summer-spec September RBOB contract, so there will be a big drop of around 22 cents when October takes the prompt position tomorrow. Most cash markets around the country have already rolled to trading vs the October futures, but those that haven’t are seeing differentials jump 20+ cents to offset that spread between the winter and summer grades.

The numerous refinery issues over the past 2 weeks showed up in the DOE’s figures with 4 of the 5 PADDs seeing lower run rates. PADD 2 was the exception to that rule as Midwestern refiners set a new record for run rates averaging more than 4.2 million barrels/day last week, which is more than 100% of their nameplate capacity. Those strong run rates help explain why PADD 2 is also the only region in the US with above average diesel inventories, while all others are closer to the low end of their 5-year range. Limited options to move those excess barrels also explains why ULSD in the Chicago region is trading 10-30 cents below neighboring markets.

Idalia has moved offshore as a tropical storm this morning, and it looks like the energy supply network dodged a bullet as terminal operations in the region appear to be unscathed and the EPA has issued another RVP waiver to allow higher than 9lb blends to come into the state to help with resupply. Tropical storm Jose formed overnight over the central Atlantic and the NHC is tracking 2 other systems, but none of them look to be a threat to the US so we’ll get to catch our breath for a couple of days before the peak of the season. 

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

Market Talk Update 08.31.2023

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Market TalkFriday, Jul 19 2024

Summertime-Friday-Apathy Trade Influencing Energy Markets

Energy markets are treading water to start the day as the Summertime-Friday-Apathy trade seems to be influencing markets around the world in the early going. RBOB futures are trying for a 3rd straight day of gains to wipe out the losses we saw to start the week, while ULSD futures continue to look like the weak link, trading lower for a 2nd day and down nearly 3 cents for the week.

Bad to worse: Exxon’s Joliet refinery remains offline with reports that repairs may take through the end of the month. On top of that long delay in restoring power to the facility, ENT reported this morning that the facility has leaked hydrogen fluoride acid gas, which is a dangerous and controversial chemical used in alkylation units. Chicago basis values continue to rally because of the extended downtime, with RBOB differentials approaching a 50-cent premium to futures, which sets wholesale prices just below the $3 mark, while ULSD has gone from the weakest in the country a month ago to the strongest today. In a sign of how soft the diesel market is over most of the US, however, the premium commanded in a distressed market is still only 2 cents above prompt futures.

The 135mb Calcasieu Refinery near Lake Charles LA has been taken offline this morning after a nearby power substation went out, and early reports suggest repairs will take about a week. There is no word yet if that power substation issue has any impacts on the nearby Citgo Lake Charles or P66 Westlake refineries.

Two tanker ships collided and caught fire off the coast of Singapore this morning. One ship was a VLCC which is the largest tanker in the world capable of carrying around 2 million barrels. The other was a smaller ship carrying “only” 300,000 barrels (roughly 12 million gallons) of naphtha. The area is known for vessels in the “dark fleet” swapping products offshore to avoid sanctions, so a collision isn’t too surprising as the vessels regularly come alongside one another, and this shouldn’t disrupt other ships from transiting the area.

That’s (not) a surprise: European auditors have determined the bloc’s green hydrogen goals are unattainable despite billions of dollars of investment, and are based on “political will” rather than analysis. Also (not) surprising, the ambitious plans to build a “next-gen” hydrogen-powered refinery near Tulsa have been delayed.

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

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Market TalkThursday, Jul 18 2024

Refined Products Stanch Bleeding Despite Inventory Builds And Demand Slump

Refined products are trading slightly lower to start Thursday after they stopped the bleeding in Wednesday’s session, bouncing more than 2 cents on the day for both RBOB and ULSD, despite healthy inventory builds reported by the DOE along with a large slump in gasoline demand.

Refinery runs are still above average across the board but were pulled in PADD 3 due to the short-term impacts of Beryl. The Gulf Coast region is still outpacing the previous two years and sitting at the top end of its 5-year range as refiners in the region play an interesting game of chicken with margins, betting that someone else’s facility will end up being forced to cut rates before theirs.

Speaking of which, Exxon Joliet was reportedly still offline for a 3rd straight day following weekend thunderstorms that disrupted power to the area. Chicago RBOB basis jumped by another dime during Wednesday’s session as a result of that downtime. Still, that move is fairly pedestrian (so far) in comparison to some of the wild swings we’ve come to expect from the Windy City. IIR via Reuters reports that the facility will be offline for a week.

LA CARBOB differentials are moving in the opposite direction meanwhile as some unlucky seller(s) appear to be stuck long and wrong as gasoline stocks in PADD 5 reach their highest level since February, and held above the 5-year seasonal range for a 4th consecutive week. The 30-cent discount to August RBOB marks the biggest discount to futures since 2022.

The EIA Wednesday also highlighted its forecast for rapid growth in “Other” biofuels production like SAF and Renewable Naptha and Propane, as those producers capable of making SAF instead of RD can add an additional $.75/gallon of federal credits when the Clean Fuels Producer’s Credit takes hold next year. The agency doesn’t break out the products between the various “Other” renewable fuels, but the total projected output of 50 mb/day would amount to roughly 2% of total Jet Fuel production if it was all turned to SAF, which of course it won’t as the other products come along for the ride similar to traditional refining processes.

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

Pivotal Week For Price Action