Mixed Bag For Energy Markets Starting Tuesday's Session

It’s a mixed bag for energy markets to start Tuesday’s session with RBOB prices seeing small losses this morning after overnight gains were erased, while crude oil contracts try for modest gains and diesel prices hover around break even. So far there are no reports of refinery upsets from the winter storm sweeping the country, but a drop-off in demand is evident across numerous states as drivers start avoiding the roads.

The sudden resignation of Canada’s Prime Minister Monday brought more questions than answers as 2 out of 3 North American countries will now be overhauling their governments at the same time. Canada is the largest oil importer to the U.S., accounting for nearly 60% of all imports, and tariff threats have loomed large over the relationship recently, while domestic infighting over environmental restrictions on Canada’s huge energy industry was also a big story last year. It seems reasonable that if a conservative majority takes control in 2025, the odds of increased output and steady exports to the U.S. are more likely than they would have been under the current regime.

Not to be left out of the North American energy story, Mexico’s new president announced plans for new government-produced EVs to be debuted at the 2026 World Cup finals in Mexico City. Those who have watched the debacle of Mexican government-owned refineries over the past decade may be skeptical that the concept will become a reality, particularly in that timeframe.

Money managers were adding to their net length in most energy contracts last week with a combination of new longs and short covering both witnessed in WTI, Brent, ULSD and Gasoil last week. RBOB was the exception to the rule with a reduction in long positions outweighing modest short covering to push the net length modestly lower on the week.

The EIA this morning highlighted US retail gasoline prices which averaged 20 cents less per gallon in 2024 than they did in 2023, and remain a major influence on taming inflation while many other asset classes are still pushing 4-5% annual gains. Unfortunately for the Republic of California, those year-on-year declines are largely being wiped out by the state’s recent changes to the LCFS program, which added an additional 12 cents/gallon or so to the program’s cost. Those costs will end up being passed down to the consumer, further expanding the cost gap for West Coast gasoline vs the rest of the country.

PBF reported unplanned flaring at its Torrance CA refinery Monday, but like most filings with the AQMD, the cause and duration of the upset were not listed. PBF did publish guidance for 2025 earlier Monday, that listed planned turnarounds at their Martinez, Delaware City and Chalmette refineries in the first half of the year.