Mixed Bag For Energy Markets To Start Friday After Thursday Near 3-Month Highs

It’s a mixed bag for energy markets to start Friday’s session after another strong finish Thursday pushed prices closer to 3-month highs. Supply disruptions and stronger equity markets both seem to be contributing to the recent price rally, while the recession fears seem to have been put on the back burner for now. The moves have not been particularly impressive, however, and there are still mixed messages being sent by the daily and weekly charts, so a pullback in the coming days to relieve an over-bought market is looking likely. 

More than 12 years after a revolution, Libya is still struggling to figure out who’s calling the shots. This week, 3 of the country’s largest oil fields have been shut in due to protests, taking around 400,000 barrels/day of production offline. Libya, Nigeria, Venezuela, and Iran are all exempt from the OPEC & Friends voluntary production cuts, and up until this latest shut-in, that had been a bearish factor on prices as exports from these underachieving producers had been growing.

Another day, another California Refinery having issues: Chevron’s refinery in Richmond CA was forced to shut units on Thursday for unplanned repairs. Basis values across the state had rallied sharply in the past week as a rash of unplanned issues hit the majority of the refineries left in the state, but dropped sharply this week after the DOE report showed actual run rates had increased to a 3-year high despite those operating hiccups. So far the Chevron news hasn’t stirred up much in the SF Bay area spot market, but there’s a chance we could see another big bounce if the downtime is significant.

So far the Texas energy grid has held up well after consecutive days of record energy use.  With another week of near-record heat and energy consumption in the forecast, there is a concern we could end up seeing refinery disruptions if the grid struggles, although it seems very unlikely we’ll see anything resembling the chaotic shutdowns we did in February 2021.

The EPA issued a statement this morning that said it would be announcing decisions involving petitions from small refineries for exemption from the Renewable Fuel Standard at 4 pm Eastern time today. In years past the yo-yo policies on small refinery exemptions (which largely depended on the party controlling the white house at the time) have had an outsized influence on RIN price movements. It’s hard to imagine the current administration changing its stance and suddenly going easy on refiners after denying essentially every petition the past couple of years, but nevertheless, RIN traders will be forced to pay attention this afternoon.

California’s Air Resource Board (CARB) announced another workshop to review potential amendments to its Cap & Trade Program on Wednesday, which sent CCA values rallying Thursday to their highest level in more than a year. While it’s still very much unknown what changes will be proposed, or whether or not those proposals will become law, there’s no mistaking the agency's attempt to make things harder on the industry, which favors higher credit values. LCFS values meanwhile continue their recent slide as the rapid influx of new renewable production continues to increase the supply of those credits, which are generated by renewable producers, whereas the CCA credits are just made up by CARB. 

Subtropical storm Don has formed in the Atlantic, but won’t be a threat to land, and just offers another reminder that while we’re enjoying a Saharan Dust-induced reprieve from hurricane activity at the moment, the stage is set for the tropics to crank up in a hurry at some point this summer. 

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