Energy Futures Dipping Lower

Energy prices are cooling off to start Thursday’s session after a solid Wednesday rally for gasoline prices as stock markets managed a one day bounce. Despite 2 days of gains, most contracts remain within striking distance of multi-month lows and appear vulnerable to more selling over the balance of the month.

4 out of the 5 LA-area refining complexes have reported unplanned flaring in the past 36 hours, with Marathon Wilmington, PBF Torrance, and Chevron El Segundo all issuing reports to the AQMD Thursday morning, while P66 LA issued its notice Tuesday night. For Chevron, that’s the 4th notice to the South Coast air quality monitoring district in the past 8 days. We did see a modest tick higher in differentials Wednesday after both gasoline and diesel differentials had been under heavy selling pressure for most of the month prior, and it will be worth watching today if any of the latest upsets spark more buying, or if they’ll be shrugged off.

Yesterday’s DOE report was bullish for gasoline with healthy demand estimates above year-ago levels helping to draw down inventories beyond the typical seasonal pace, despite refinery runs ticking higher on the week. The outlook for diesel wasn’t quite as positive as the demand estimate slid for a 3rd straight week and days of supply held steady. There continues to be a notable glut of diesel in the middle of the country, while the West Coast also saw a healthy diesel build despite lower refinery runs as increased imports helped to heal supplies. If you ignore the RD inventories, west coast diesel stocks are below their 5 year seasonal range, but when you include them, inventories are near the top end of the range, which helps to explain the big discounts for LA-area diesel.

OPEC held its demand outlook steady in its March oil market outlook, estimating 1.4kb/d of growth globally, despite the uncertainty swirling on many issues. The cartel also noted an increase in refining margins in all major basins over the past month caused by an increase in offline capacity. OPEC’s oil production increased by 154kb/day during the past month with gains from 10 out 12 participating countries. Meanwhile, Kazakhstan’s production surged to an all-time high before Ukraine damaged the Caspian pipeline system that takes the country’s product through Russia for export. A

The IEA’s monthly outlook predicts global oil demand will accelerate in 2025 with Asian nations continuing to drive the gains although the demand bump is largely due to petrochemical needs, not transportation fuels. Despite the tick higher in growth, the agency still predicts that global supplies will outpace demand by around 600kb/d this year.

Delek reported an upset in an FCC unit at their Big Spring refinery that’s expected to last at least two full days.

Suncor’s refinery near Denver reportedly spilled cyanide into a neighboring creek last month according to a report by the Denver Post, adding to the long list of environmental issues that have plagued that facility for years.

In a presentation to Sigma members Wednesday, Walter Zimmerman of ICAP suggested that RBOB’s high trade on March 4th marked the peak of the annual spring gasoline rally, earlier than normal due in large part to weakening economic expectations that coincide with the ongoing meltdown in stocks. If you’re interested in technical analysis, ICAP has some of the best available for refined products.