ULSD Wiped Out The 8 Cent Gains From Tuesday

Market TalkThursday, Feb 23 2023
Pivotal Week For Price Action

Energy contracts were trying to bounce to start Thursday’s session after another heavy wave of selling knocked them sharply lower on Wednesday and saw ULSD wipe out the 8 cent gains from Tuesday.

WTI has traded lower for 6 consecutive trading sessions, but still doesn’t look overly bearish on the charts, as it remains above the lows set in each of the prior 3 months. That said, the contract is “only” $5 away from setting new lows for the past year, and if the December support near $70 breaks, there’s not much on the charts to stop a slide to $62. 

Russia is trying to stop the slide in oil prices, with reports suggesting plans to cut exports from Western ports by 25%, in excess of the already announced production cuts. The relative lack of reaction to that latest attempt to stir the oil pot is yet another sign of the weak market sentiment compared to a year ago when the war broke out.

ULSD still looks the most bearish on the charts, even though fundamentally there’s a strong argument that diesel stocks remain in the most precarious position. Even with today’s modest gains, ULSD prices are just 7 cents off of their lows for the past 12 months and if the $2.66 range fails to hold it looks like there’s a good chance, we’ll see a quick move towards $2.50.

The API reported another large build in US Crude stocks of nearly 10 million barrels last week, adding to last week’s estimate of a 10.5-million-barrel gain. The API’s figures seem to be catching up to the EIA’s data that showed stocks swelled by 16 million barrels last week as refiners cut runs due to heavy maintenance scheduled and numerous unplanned outages.  The API also estimated small builds in gasoline and diesel inventories, in line with seasonal expectations. The EIA’s report is due out at 11am Eastern.

California’s LCFS credits spiked to a 6 month high this week after CARB suggested it would propose accelerating its emissions reduction targets this week to prop up prices that have come under steady selling pressure over the past 2 years thanks to a surge in renewables production.  The $20 increase in credits this week adds roughly 2.5 cents/gallon to the cost of each gasoline and diesel (which create a deficit under the program) sold in the state but increases the value of Renewable Diesel by 10-13 cents/gallon depending on the CI value of the product

California’s Cap and Trade program credits (CCAs) didn’t move on this news, as that program has a set credit amount, rather than a mechanism for renewable producers to create credits.  The February CCA auction results are expected later this afternoon, which can be a market moving event depending on where prices settled out in the quarterly auction vs where they’ve been trading in the open market.

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Market Talk Update 02.23.2023

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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.

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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.

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Pivotal Week For Price Action