Severe Weather Across Large Parts Of The Country, The NHC Is Giving 50% Odds Of A Tropical System Being Named Over The Eastern Atlantic In The Coming Days

ULSD is leading the energy complex higher after breaking out above the sideways trading range that had held prices the past 7 weeks and is currently holding gains of nearly 15 cents/gallon for the week. If the bulls can maintain the upward momentum and settle above $2.50 today, there’s a strong case to be made on the charts that we’ll soon see prices run up to the 2.60-2.70 range that held prices for about a month this spring. 

Values to ship gasoline on Colonial’s line 1 collapsed Thursday after reports of an upset at Exxon’s Baytown refinery, as traders seem be to anticipating a shortage at one of the largest origin points on the pipeline, even though USGC basis values didn’t move much on the news.  Meanwhile, Marathon’s Texas City refinery (aka Galveston Bay) refinery continues to have challenges a month after another deadly fire broke out at the facility, with two more unit upsets reported to the TCEQ this week.  

California carbon allowances (CCA) prices continue to rally to their highest levels of the year following a workshop Wednesday where regulators presented their intentions to promote tighter requirements and higher credit values.  There is now a 3 week window for stakeholders to provide feedback on the revised plan before it moves into the formal rulemaking stages. Interestingly enough, California’s LCFS credit values have dropped near a 2-month low, demonstrating the difference between a market-based credit system that’s incentivized a huge influx of renewable fuel production, and the Cap & trade program that just makes up the amount of credits they’ll sell.

So far there are no reports of damage to energy supply infrastructure from the wave of severe storms sweeping across the southern US this week. So far there are no reports of upsets from either of the 2 TX Panhandle refineries following last night’s deadly tornado in Perryton TX, which is roughly 75 miles northeast of those facilities, although Valero’s McKee facility did report an upset due to thunderstorms Tuesday night and the Borger facility continues to work on repairs after being damaged in the Christmas blizzard.

Besides the outbreak of severe weather across large parts of the country, the NHC is giving 50% odds of a tropical system being named over the eastern Atlantic in the coming days.  This system is currently moving off the west coast of Africa and has an early path that could allow it to threaten the US (in an area that’s developed some of the largest storms on record) so will need to be watched. It is rare for a storm to develop in this area so early in the season, with only 3 storms ever forming in this region in June, but with waters already at record warm temperatures, don’t expect this season to follow the script.

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