Energy Futures Are On Pace For Weekly Gains After Reaching Multi-Year Lows

Energy futures are on pace for weekly gains after reaching multi-year lows Tuesday as a 3-day recovery rally has pulled prices back from the depths of demand despair. The bounce has been relatively modest so far, and longer term charts suggest the bulls aren’t out of the woods yet, particularly with inventories looking ample and demand looking suspect.

Gasoline futures are leading the move higher this morning, with improving calendar spreads suggesting a short-term tightening of supply, consistent with a storm hitting the Gulf Coast refining zone, although those gains may soon reverse if facilities continue to come back online and heavy rains hamper demand across a wide stretch of the East Coast this weekend. The storm also didn’t do much to improve refinery margins, with crack spreads once again hovering near break even levels for many facilities, and the threat of more closures like the one announced yesterday looming large.

The EIA has been publishing updates on the impacts of Francine’s landfall, all of which appear to be minimal as of this morning. The latest reports suggest that only 1 refinery in the region, Shell’s Norco plant, has had any issue resuming normal run rates following the storm, and no damage to offshore oil production facilities has been reported.

Meanwhile, terminals in the region appear to have escaped with minimal impact as facilities around the impact zone near Baton Rouge, New Orleans and Lake Charles were all loading trucks Thursday.

The NHC is still tracking 3 other storm systems in the Atlantic as the peak of hurricane season passes. None of these storms bring a hurricane threat to land, but one system hovering off the Carolina coast will add to the heavy rains from Francine to swamp large parts of the region and put a damper on demand.

Valero reported an upset in a Sulfur Recovery unit at its Texas City refinery Thursday, but that event didn’t appear to slow other units. Flint Hills reported a diesel leak at its loading rack at the Corpus Christi plant, but

Head Fake; Just when it looked like California basis values were ready to collapse as ailing refineries were coming back online, a late day bid for San Francisco diesel pushed those differentials to their highest premium of the year north of 40 cents/gallon, while most other regions in the country are trading at a discount to futures. Meanwhile, LA basis values were selling off despite a 5th day of flaring at PBF’s Torrance facility, opening up a spread of nearly 45 cents/gallon for diesel values and may explain why you’ll see full trucks of diesel heading north on the 5 and the 101 this weekend.