Refinery Upsets Whipsaw Energy Markets

It’s been a rollercoaster ride for energy prices this week with strong gains Monday turning into heavy losses Tuesday, only to see prices rally again overnight and then give up those gains this morning. The theme seems to be that prices have rallied when refinery disruptions appear, then give back the gains when it looks like those issues may not be as bad as originally feared. The first up and down cycle seemed to have a lot to do with the impact, or lack thereof from French protests, while the second ride came courtesy of the severe weather sweeping the US.  

The tornado outbreak near Houston Tuesday came dangerously close to many refineries, including a handful of the largest facilities in the country. There were a few reports of power outages and other operational upsets, but so far there are no reports of damage to any facilities or units being completely knocked offline, so we may have just dodged a big bullet in terms of supply security. While we did see a strong price rally overnight as it appeared there would be some disruption to supply in this critical region, the 7-8 cent gains for refined products have been erased this morning as it appears the damage may not have a meaningful impact on output.

In addition to the latest string of weather-related disruptions along the Gulf Coast, there were reports of a fire that injured an employee at the PBF Delaware City refinery Tuesday, although here too it’s unclear if operations were impacted by that event.  That’s the second fire in less than a week at a PBF facility, after its plant outside of New Orleans shut a unit over the weekend.  Meanwhile, one of the six workers injured in a fire at the Borger TX refining complex last week died of his injuries over the weekend.

In total, we’re seeing unplanned issues stretching coast to coast, with facilities accounting for more than 10% of US production impacted, although the actual extent of the output losses remains unclear, except at the Suncor facility in Colorado which remains completely offline.

We’ll get another look at the impact of this variety of events in today’s DOE report.   Yesterday the API reported another build in crude inventories of 3.4 million barrels – suggesting that refinery rates are still restricted, while gasoline inventories saw a small build of 620,00 barrels, and distillates dropped by 1.9 million.

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