Diesel Futures Are Trying To Drag The Energy Complex Lower To End The Week

Diesel futures are trying to drag the energy complex lower to end the week losing about a nickel in early trading as refinery restarts and sluggish demand both put downward pressure on prices that have lost more than 20 cents on the week. RBOB futures are reluctantly following ULSD’s lead so far, down around 3 cents so far, while WTI is clinging to small gains.

WTI had its highest settlement since November Thursday, just north of $78/barrel, and came within 2 cents of reaching a 3-month intra-day high overnight. IF WTI can break and hold above this $78 range, the charts suggest there is a good chance we’ll see a run at the $85 level in the next few weeks, while a failure spells more sideways action.

Natural gas prices have fallen to their lowest levels since the depths of the pandemic this week, removing a bid from the diesel market as heating supply remains ample without supplementing with ULSD.

Today’s PPI report confirmed the stubborn-inflation theme that the CPI report started Tuesday, which led to heavy selling in equities. Stocks are pointed lower again to start the session and are threatening to give up their hard-earned gains for the week.

Reports that BP is restarting its Whiting refinery after being offline for 2 weeks seems to be contributing to the weak action in products this morning. If all goes well on that startup, which is the most vulnerable time for a refinery, they should be back to normal operations in about a week. In addition to the BP restart, Total’s Pt. Arthur TX plant is reportedly in restart after a failed attempt to get back online 2 weeks ago. That facility has been offline since the January freeze.

Cenovus joined PBF Thursday in reporting a loss in its refinery operations in Q4 of 2023, ending an otherwise strong year on a weak note. Unlike PBF however, Cenovus was able to lean on profitable oil production operations to keep total profits positive, but that didn’t stop the company from reducing run rates at its US facilities due to the “…exceptionally weak refined products pricing environment in December…”

Flint Hills reported a leak in a pressure relief valve at the Corpus Christi West refinery yesterday, although outside of a brief flaring event operations don’t seem to have been impacted and the valve was replaced according to the filing.

Union workers at Marathon’s Detroit facility voted to strike over wage negotiations this week, but only if negotiations break down. Marathon seemed to shrug off that threat, saying they were prepared to operate the facility without the union employees. Given the excess supply in the region lately, and the struggle for some facilities just to break even, it doesn’t seem like the union has the ideal amount of leverage at the moment. 

Chevron and Marathon both reported unplanned flaring at their LA-area refineries Thursday, continuing a string of nearly a dozen upsets reported to the AQMD since the heavy rains started nearly 2 weeks ago. So far, those unplanned events don’t seem to be hurting operations, at least not as much as the rain has hurt demand, as diesel basis values dropped more than a nickel in LA this week.

Today’s interesting read from Reuters: Why the flurry of M&A in Oil production isn’t helping US refiners offload their aging assets.

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