Early Gains For Energy Futures

Refined product futures are leading the energy complex higher this morning with early gains of around 3 cents. Unlike the recent pattern, products seem to be shrugging off lower equity prices in the early going aided by declining inventory readings, and reports that China is ready to begin negotiations on trade with the U.S..

The API estimated that gasoline and diesel inventories in the U.S. each dropped by more than 3 million barrels last week, which is consistent with anecdotal evidence of buyers stepping up purchases after holding off the week prior in the wake of the huge tariff panic selloff. The industry group estimated oil inventories increased by 2.4 million barrels for the week. The DOE’s weekly report is due out at its normal time this morning.

Los Angeles gasoline basis values jumped 12 cents/gallon Tuesday after reports of additional upsets at PBF’s Torrance refinery and Marathon Wilmington, while diesel differentials ticked lower on the day. Valero notified California regulators this morning that it intends to idle, restructure or cease refining operations at their Benicia (SF Bay area) refinery by the end of April 2026. If this ends up happening it would mark the 3rd of 5 Bay area refineries that would be shuttered or converted since 2021.

Washington state passed a new bill that will make the state’s Clean Fuel Standard more stringent, defying the executive order from a week ago to block state’s from enforcing climate bills. California’s air resources board has also been working to make its clean fuel (LCFS) and Cap & Trade programs more stringent, but has become mired in internal conflict within its own state. California’s governor announced the state planned to extend the existing Cap & Trade program beyond the current 2030 expiration date, although details were scarce on how the extension would look. Meanwhile, CARB’s open comment period on the LCFS rule changes are set to expire at the end of the month, with an official rule change submission expected sometime in the following couple of months.

The ripple effects of the recent lockdown on truck imports of fuel to Mexico continue to permeate throughout the Southwestern U.S.. Rack spreads that had reached their highest levels in more than a year have come crashing back down in just a few short days as the incremental demand that had been keeping many terminals tight on supply came to a screeching halt, just as several refineries returned to full run rates after completing spring maintenance.