Shut Down of Colonial Pipeline’s Main Gasoline Line, for Potential Leak in Georgia

After a 1 day pullback, the rally in energy prices has resumed Wednesday, with ULSD futures once again leading the push up 3 cents in the early going. Stock markets are pointing sharply higher following the latest CPI report that showed inflation holding around 2.9% for the year, while non-food and energy prices were up .2% for the month, continuing the “better than expected” trend from the PPI report.

The big news Tuesday was a shut down of Colonial pipeline’s main gasoline line, which supplies roughly ¼ of the demand on the East Coast as the company investigates a potential leak in Georgia. While futures aren’t reacting with near the ferocity as we’ve seen with other Colonial shutdowns in the past decade, there are plenty of concerns at the terminals across the region until more is known about how long it will take to fix the issue. So far there aren’t physical outages, but most supply points have implemented strict allocations. Since it’s January and demand is at its lowest point of the year, this won’t be a big issue if it’s fixed in a few days, but the longer it lingers, the more panic buying will set in.

West Coast gasoline markets continue to see heavy buying after Marathon’s Wilmington refinery was shut down and evacuated by a fire Monday, and PBF reported unplanned flaring at its Torrance facility, with a subsequent filing saying the company will need a week for “start-up/shut down” which is code for repairing a unit taken offline. Neither event has been linked to the wildfires in the area, and the supply network seems to be continuing to function normally since Kinder Morgan restored power to its lines late last week.

In the polar opposite situation, Group 3 diesel basis values continue to get sold off heavily, with differentials approaching a 44 cent discount to futures, opening up a 30+ cent spread to run ULSD from Oklahoma to Texas.

We’re also seeing a notable diversion in credit values this week as RIN prices continue to rally past 2 month highs, with some separation between D4 (bio/RD/SAF) Rins and D6 (ethanol) values for the first time in 18 months. D4 values are now going for around 75 cents/RIN following the Treasury’s guidance that imports of used cooking oil won’t qualify for the Clean Fuel Production Credit (CFPC/45Z) while D6 values are holding just north of 70 cents/RIN as producers try to maximize output with year round E15 now a possibility.

While RINs are rallying, California’s Carbon Allowance credits are getting hammered as delays in the planned amendments to make the Cap and Trade law more stringent seem to have traders bailing out of long positions.

The API estimated more big builds in refined product inventories last week as the winter storms battered demand more than they impacted supply across a large swath of the country. Gasoline stocks were estimated to increase by just under 5.4 million barrels, while distillates were up nearly 4.9 million. Crude oil stocks were estimated to decline by 2.6 million barrels on the week. The DOE’s weekly status report is due out at its normal time today, and will be delayed a day next week for the MLK day holiday.

Yesterday the EIA published their monthly Short Term Energy Outlook, which included the agency’s first forecasts for 2026. The Agency (and more accurately the company it hires to do analysis) predicted downward pressure on petroleum prices over the next couple of years as excess oil production capacity continues to loom large over the market. The report did note that its forecasts were created prior to the announcement of new Russian sanctions on January 10th that have pushed tanker prices sharply higher now that it appears the shadow fleet may not be able to operate as easily.

OPEC held its forecast for both supply and demand steady in its latest monthly oil market report predicting healthy global economic growth of 3.1% in 2025 and 3.2% in 2026. The cartel’s production held essentially flat on the month with gains in Libya and Nigeria offsetting small declines in Saudi Arabia and the UAE.

Speaking of which, while the Nymex will trade in a partial session Monday, the spot markets will not be assessed, so most of the industry will take the day off. Banks will also be closed Monday.