The Bulls Have Regained Control Of Energy Markets This Morning

The bulls have regained control of energy markets this morning, pushing WTI north of $85, and Brent above $89 for the first time since October. ULSD is leading the move higher this morning, up around a nickel as more Russian supply disruptions are offsetting the supply overhang in Asian markets that’s caused diesel prices to lag the rest of the complex for most of the year.

A Bloomberg article yesterday estimated that Russian diesel exports would drop more than 20% in April, following the drone attacks that have hit at least a dozen refineries in the past couple of months. Then, overnight Russia’s 3rd largest refinery was struck by a drone, which sent product prices surging until reports that the damage was minor cooled off the buying.

The EIA this morning highlighted US refined product exports in 2023, which set a new record with more than 256 million gallons every day being shipped to other countries. Propane led the increases, with shipments to Asia for heating, cooking, and petrochemical use all helping to soak up the extra propane production coming from shale drilling operations in the US. Diesel exports were the big loser last year, decreasing by 8% as Brazil and others took advantage of disadvantaged Russian exports. This is why Ukraine’s drone attacks will be meaningful for US refiners as they’ll once again be the supplier of choice for Brazil and the rest of the Americas.

An oil spill was reported in the northern Caspian Sea, near the large Kashagan oil field. That area supplies roughly 1% of global oil demand, with a key pipeline that transports oil from Kazakhstan through Russia to world markets.

An attack on the Iranian consulate in Syria is the latest escalation in the Middle East violence drawing Iran closer to a direct confrontation with Israel and the US, which some believe could exacerbate the Red Sea shipping challenges.

P66 reported that an FCC unit at its Borger refinery in the Texas Panhandle was forced to shut down yesterday, which caused unplanned flaring that lasted at least a full day. No word yet on the cause or duration of this shut down.

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