Refined Product Inventories Are Down Across The Board This Week

Refined product futures settled up modestly after yesterday’s news with prompt month RBOB contracts adding 1.5 cents and HO almost flat at +.0032 cents. WTI and Brent lost $1.15 and $1.03, respectively. The small gains in gas and diesel prices were erased overnight with June RBOB down 2.8 cents and HO down around a penny. WTI and Brent are trending further down this morning, both showing 45 cent losses. The early morning movements indicate recession fears are still intact as the Group of Seven kicks off their meeting in Japan today with a question mark surrounding whether or not the US government will raise its debt ceiling.

Yesterday the EIA reported crude up almost 3 million barrels on the week as the congressionally mandated sales from the Strategic Petroleum Reserve continue. The 362 million barrels remaining in the SPR is the lowest level since October 1983 and the 26 million barrels in sales are expected to continue through the end of June this year. Crude exports fell back to the seasonal 5-year average last week, but barrels exiting the US are still outpacing last year's record setting average.

Refined product inventories are down across the board this week with each PADD reporting declines in both gas and diesel. Diesel stocks are at the low end of the 5-year range, sitting just above year ago levels when the major supply concerns began. Part of the drop can be explained by 1.8 million barrels in diesel exports and healthy bumps in demand for both products as we head into the driving season.

Refinery runs were tame in total last week adding just 10,000 b/d as increases in PADDs 4 and 5 were largely offset by a decline in the Gulf Coast. Run rates remain above average despite a still week, sitting just above year ago levels. PADD 3’s utilization rate has been steadily increasing since mid-March and has reached its highest level since last December, but as we learned last week, that number is likely to remain artificially inflated for a year since the EIA won’t be including the additional 250,000 b/d capacity out of Exxon’s Beaumont facility in their annual Refinery Capacity Report until June 2024.

The spread between Phoenix diesel rack prices and LA spot shot up from around +10 cents late February to $1.42 peak by the end of April. Current values show Phoenix rack prices still going for $1.19 over LA as diesel shortages in the Southwestern US continue to impact the Arizona market. While these spreads are still high, once rack prices start to lower against spots, the gap tends to close rapidly.

Click here to download a PDF of today's TACenergy Market Talk.