Refined Products Are Rallying For A 6th Consecutive Session

Refined products are rallying for a 6th consecutive session, wiping out December’s early losses, and threatening to break out of the downward trend that’s gripped these contracts since late summer. ULSD futures have added 27 cents/gallon since bottoming out last week, while RBOB gasoline futures have added 24.

Gulf Coast spot values have the most notable recovery during this time, with basis differentials for diesel cut in half from their record-setting discounts and combined with the big bounce in futures have added 40 cents to cash values in the past 8 days. With that rally in USGC prices, the spreads to NY Harbor have shrunk, which has in turn depressed values to ship along Colonial. 

The API reported inventory builds across the board last week with diesel stocks leading the way adding 2.7 million barrels, while crude oil stocks increased by 939,000 and gasoline ticked up by 669,000.  The DOE’s weekly report is due out at its normal time this morning, then it will be delayed 3 out of the next 4 weeks due to the holidays. 

Canada is channeling its inner California while announcing its Electric Vehicle Availability standard that includes a ban on new internal combustion engine sales in 2035. There are still plenty of questions on how a state known for sunny warm weather is going to handle the transition to EVs over the next decade, so the neighbors to the north are going to have some explaining to do on how they’ll plan to get charging stations to the North Pole. 

One of several unintended consequences of the EV push has been that biofuel producers are feeling left out in the cold and demanding new mandates to keep their products relevant. Right on cue, the EPA sent a proposal to the white house requesting that 8 Midwestern states be allowed to run E15 year-round, after efforts for a more widespread waiver of the clean air rules to allow more pollution in order burn more corn alcohol in vehicles failed to gain political traction outside of the corn growing states.

PBF’s refinery in Martinez was issued several citations after an upset at its facility Friday led to flaring and a grass fire over the weekend. San Francisco spot gasoline differentials did tick higher with the roll to January pipeline cycles but remain well below where they were earlier in the month suggesting this event isn’t having much impact on supply. Meanwhile, Marathon’s refinery in Los Angeles had another unplanned flaring event Tuesday, the 2nd such upset in 4 days, which has helped put a bid under values that had been under heavy selling pressure.

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