RBOB Prices Have Bounced Back and Forth Overnight and Are Hovering Just Below Break-Even Levels This Morning

Energy markets are seeing modest selling for a 2nd day as the world takes in news of a potential end to the latest war in the Middle East and Colonial pipeline appears set to restart its main gasoline line today.

Diesel futures are leading the move lower this morning, down around 2 cents in the early going, but are just 4 cents below the 6 month highs set overnight Thursday. Diesel futures are due for a pullback after rallying nearly 30 cents in a week, and cash markets everywhere besides LA are trading in negative territory, suggesting most US traders are having no trouble finding spare ULSD.

RBOB gasoline futures led the slide Thursday, giving back roughly 1/3 of the gains they’d made in the previous 5 sessions. RBOB prices have bounced back and forth overnight and are hovering just below break-even levels this morning.

Israel approved the Gaza Cease fire plan overnight, and as long as things stay on track, hostilities should start winding down on Sunday. The Houthi rebels who have wreaked havoc on Red Sea shipping over the past 15 months signaled a pause in their attacks, but expect a slow return to transiting the region as shippers will no doubt be weary of another flare up. The decision to step back by the Houthis could have to do something with the new airstrip built on a nearby island that would possibly allow their adversaries to stage more direct airstrikes on their infrastructure. Meanwhile, Iran has been conspicuously quiet throughout, with many analysts suggesting the incoming administration is set to crack down on their oil export sanction violations.

Colonial’s latest update on Line 1 Thursday afternoon said the line should be able to restart earlier than expected on Friday, compared to earlier expectations of being shut down all day Friday, as long as site conditions remained stable. No word yet this morning, but if the line does start moving again today the region will breathe a big sigh of relief. It will take the better part of next week to get terminals fully caught up after missing the better part of 4 days’ worth of batches, but demand is also likely to slow as those that filled up “just in case” will now have extra inventory to work off as well.

PBF notified Southern California regulators that it will have 4 days of flaring starting today, following 3 different reports of unplanned flaring this week. The latest “startup/shut down” activities are presumably part of fixing a unit that needs unplanned maintenance is happening concurrently to the week-long flaring they notified regulators that started Tuesday. Basis values in LA have pulled back the past couple of days after surging 20 cents following upsets at both PBF and Marathon refineries in the area, suggesting concerns of a lasting disruption are minimal.

The EIA this morning took a look at their game film from 2024 and compared actual price and production data to their predictions for the year. The agency’s hired analysts (who happen to come from the same parent company as the one that brought you “AAA” rated credit default swaps in the 2000’s) are patting themselves on the back for an accurate year of predictions, with the notable miss coming from underestimating the amount of non-oil liquid produced in the US as NGLs continue to confound the DOE, which is the main reason for the huge swings in the weekly “Adjustment Factor” on crude oil inventories.