It’s A Quiet Start To Trading As The 2nd Quarter Of 2023 Winds Down

It’s a quiet start to trading as the 2nd quarter of 2023 winds down, with many already looking ahead to a long holiday weekend. While most energy contracts are poised to finish the month higher, they’re still lower than they were at the end of Q1, with plenty of work to be done if the bulls are going to regain control. Diesel futures are down $1.50/gallon from this time last year, while gasoline futures are down more than $1 and the charts continue to send mixed signals for what’s ahead. 

Almost all trading has shifted away from the expiring July RBOB and ULSD contracts, so look to the August figures for direction today if your market hasn’t already rolled.

See the holiday calendar below for a recap of who is and isn’t open to start next week.  Monday will be particularly confusing for rack pricing as the Nymex and OPIS both have normal publishing plans but Argus and Platts will both be closed. 

The East Coast continues to show signs that physical supply is tightening up after a relatively relaxed spring. Colonial line 1 premiums jumped back into positive territory as gasoline values in NYH relative to the Gulf Coast have gained 10 cents/gallon over the past 10 days.  Distillates are seeing strength as well with NYH spots now going for nearly 20 cents/gallon more than the Chicago market and 7 cents above the Gulf Coast.

The West Coast is also seeing strength, with gasoline and diesel basis in California seeing healthy gains this week following multiple refinery upsets. The strength is primarily focused in the LA area, with CARB diesel premiums hitting their highest levels since February yesterday.

The 4th largest refinery in the US continues to struggle, reporting 2 more-unit upsets to regulators Thursday, just 2 days after a chemical leak sparked a shelter in place and less than 2 months after a deadly fire. Gulf Coast basis markets continue to shrug off this news with basis values not making any perceived moves due to those upsets while regional inventories remain at average levels even though exports remain robust.

Ethanol RINs (D6) have recovered the losses they took after the EPA announced it was lowering its de-facto ethanol blending requirements for the next two years, even though outright ethanol prices have dropped by more than 20 cents/gallon in the past 3 days, which are following a sharp drop off in corn and other grain prices as drought fears across the Midwest seem to be coming to an end. D4 RINs are now trading essentially flat to D6 RINs, a far cry from the 20 cent premiums they carried for much of last year, thanks to the rapid influx of new renewable diesel production. Of course, even though the RIN values are the same, the total value for RD production is much higher as each gallon produced generates 1.7 RINs, vs 1.5 for biodiesel and 1 for ethanol.

The EPA announced new rules to prevent PFAS chemicals to enter the marketplace. That new framework could be another nail in the coffin of the beleaguered Suncor refinery near Denver, as a new report notes a spike in PFAS from that facility in May, adding to the comedy of errors experienced by that company over the past year. 

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