Today Is The Last Trading Day For March RBOB And ULSD Contracts
Gasoline prices are leading the energy complex in another rally Tuesday as refinery issues around the country, on top of an already busy maintenance season have some traders acting like the respite in supply disruptions we’ve become accustomed to over the past year may be coming to an end. While diesel prices have been leading the action for most of the past year, we’re now in the window of the annual spring gasoline rally so it won’t be surprising to see RBOB take the lead more often over the next several weeks.
Today is the last trading day for March RBOB and ULSD contracts. Most regional markets have already transitioned to trading vs the April contracts, but the NYH and Group spots will change today, so watch the RBJ and HOJ contracts for direction today if you haven’t already made the switch. Tomorrow will no doubt create confusion, as it does every year, when the April RBOB contract takes over the prompt position as it is trading at a 20+ cent premium to March futures due to the change in RVP specifications between the contracts and wreaking havoc on basis and rack spreads due to the mismatched timing of pipeline, terminal and retail transitions to summer-grade fuels.
More coast to coast winter storms are keeping drivers off the roads in parts of the country, while the risk of power outage and wind damage will keep some refinery operators on edge for the rest of the week. There were at least 3 different refinery issues talked on the West Coast Monday, and while it’s hard to assess what may be storm related, and what has to do with ongoing spring maintenance, the strong reaction in gasoline basis values left no doubt that traders see a sudden reduction in supply. Both LA and San Francisco spots rallied to 4 month highs Monday, with SF CARBOB values leading the way trading at a 55-cent premium to April futures.
The gulf coast also had several reported hiccups at refineries, with plants in Pasadena, Deer Park, Big Spring and Baton Rouge all said to be dealing with unplanned issues. So far Gulf Coast basis markets are largely shrugging off that news with little change in either gasoline or diesel values.
The EIA took a closer look at the impacts of the Suncor refinery downtime this winter, noting the regional price increases while most of the US was enjoying lower prices. That facility has been in the process of restarting some units over the past couple of weeks, and has been producing some fuel, although there have been numerous leaks and delays along the way. Markets for space on Magellan’s mountain line are still being talked at double digit premiums as suppliers believe it will take at least another month for supplies to heal, but those values are down 40-50 cents from their peak in January.
A suspected drone attack started a fire near a Russian refinery on the coast of the black sea overnight. Given the location of the facility, and the immediate threats to not spread “Fake information”, we’ll probably never know the real cause or effect of this latest attack on Russian energy infrastructure.
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View AllGasoline Futures Are Leading The Way Lower This Morning
It was a volatile night for markets around the world as Israel reportedly launched a direct strike against Iran. Many global markets, from equities to currencies to commodities saw big swings as traders initially braced for the worst, then reversed course rapidly once Iran indicated that it was not planning to retaliate. Refined products spiked following the initial reports, with ULSD futures up 11 cents and RBOB up 7 at their highest, only to reverse to losses this morning. Equities saw similar moves in reverse overnight as a flight to safety trade soon gave way to a sigh of relief recovery.
Gasoline futures are leading the way lower this morning, adding to the argument that we may have seen the spring peak in prices a week ago, unless some actual disruption pops up in the coming weeks. The longer term up-trend is still intact and sets a near-term target to the downside roughly 9 cents below current values. ULSD meanwhile is just a nickel away from setting new lows for the year, which would open up a technical trap door for prices to slide another 30 cents as we move towards summer.
A Reuters report this morning suggests that the EPA is ready to announce another temporary waiver of smog-prevention rules that will allow E15 sales this summer as political winds continue to prove stronger than any legitimate environmental agenda. RIN prices had stabilized around 45 cents/RIN for D4 and D6 credits this week and are already trading a penny lower following this report.
Delek’s Big Spring refinery reported maintenance on an FCC unit that would require 3 days of work. That facility, along with several others across TX, have had numerous issues ever since the deep freeze events in 2021 and 2024 did widespread damage. Meanwhile, overnight storms across the Midwest caused at least one terminal to be knocked offline in the St. Louis area, but so far no refinery upsets have been reported.
Meanwhile, in Russia: Refiners are apparently installing anti-drone nets to protect their facilities since apparently their sling shots stopped working.
Click here to download a PDF of today's TACenergy Market Talk.
The Sell-Off Continues In Energy Markets, RBOB Gasoline Futures Are Now Down Nearly 13 Cents In The Past Two Days
The sell-off continues in energy markets. RBOB gasoline futures are now down nearly 13 cents in the past two days, and have fallen 16 cents from a week ago, leading to questions about whether or not we’ve seen the seasonal peak in gasoline prices. ULSD futures are also coming under heavy selling pressure, dropping 15 cents so far this week and are trading at their lowest level since January 3rd.
The drop on the weekly chart certainly takes away the upside momentum for gasoline that still favored a run at the $3 mark just a few days ago, but the longer term up-trend that helped propel a 90-cent increase since mid-December is still intact as long as prices stay above the $2.60 mark for the next week. If diesel prices break below $2.50 there’s a strong possibility that we see another 30 cent price drop in the next couple of weeks.
An unwind of long positions after Iran’s attack on Israel was swatted out of the sky without further escalation (so far anyway) and reports that Russia is resuming refinery runs, both seeming to be contributing factors to the sharp pullback in prices.
Along with the uncertainty about where the next attacks may or may not occur, and if they will have any meaningful impact on supply, come no shortage of rumors about potential SPR releases or how OPEC might respond to the crisis. The only thing that’s certain at this point, is that there’s much more spare capacity for both oil production and refining now than there was 2 years ago, which seems to be helping keep a lid on prices despite so much tension.
In addition, for those that remember the chaos in oil markets 50 years ago sparked by similar events in and around Israel, read this note from the NY Times on why things are different this time around.
The DOE’s weekly status report was largely ignored in the midst of the big sell-off Wednesday, with few noteworthy items in the report.
Diesel demand did see a strong recovery from last week’s throwaway figure that proves the vulnerability of the weekly estimates, particularly the week after a holiday, but that did nothing to slow the sell-off in ULSD futures.
Perhaps the biggest next of the week was that the agency made its seasonal changes to nameplate refining capacity as facilities emerged from their spring maintenance.
PADD 2 saw an increase of 36mb/day, and PADD 3 increased by 72mb/day, both of which set new records for regional capacity. PADD 5 meanwhile continued its slow-motion decline, losing another 30mb/day of capacity as California’s war of attrition against the industry continues. It’s worth noting that given the glacial pace of EIA reporting on the topic, we’re unlikely to see the impact of Rodeo’s conversion in the official numbers until next year.
Speaking of which, if you believe the PADD 5 diesel chart below that suggests the region is running out of the fuel, when in fact there’s an excess in most local markets, you haven’t been paying attention. Gasoline inventories on the West Coast however do appear consistent with reality as less refining output and a lack of resupply options both continue to create headaches for suppliers.