The Choppy Action Continues For Energy Prices

The choppy action continues for energy prices that are attempting another modest rally after some big back and forth swings in Monday’s session. Fundamentally, the case for prices bottoming is getting stronger as lingering supply issues coincide with demand picking up both domestically and abroad. Technically, the energy complex remains stuck in neutral, with a wide range for prices to swing inside of without creating a new trend.

The DOE’s monthly market report will be due out later this morning. The DOE rejected the first round of offers made to bring some oil back to the SPR, after the record-setting drawdown last year. Terms of the offers weren’t disclosed, but the apparent lack of competitive interest for just 3 million barrels, compared to the draw-down of over 220 million barrels over the past year, suggests that the refill may take a very long time.  

The Russian owned refinery in Sicily will be sold to a consortium including trading house Trafigura, which should allow the facility to continue operating – and exporting products to the US. 

Multiple Brazilian refineries were reportedly threatened during the failed coup attempt this week, but state refiner Petrobras says the facilities were able to repel the protesters and continue to operate normally. 

Meanwhile, US refiners continue to race to repair facilities damaged in the Christmas blizzard before the annual demand restart catches the system short on supplies again. A double digit percentage drop in demand during the last week of the year softened the blow of one of the top 5 refinery disruptions ever, but now as drivers get back on the road, restart delays continue to create tighter-than-normal markets around large parts of the US.

The Suncor facility near Denver is still the only plant in the US that’s confirmed it will be offline for multiple months following the storm, but smaller issues at facilities from the Midwest to the Gulf Coast continue to linger, which is starting to cause supply allocations in places you’d not expect to see them in January otherwise. Cenovus energy said Monday that its plant near St Louis is still only operating at about 2/3 capacity due to the storm, while its Borger TX facility will need another week to get back up to full rates.

East Texas is also seeing unusually tight supply as the Shreveport refinery continues to struggle to get back up to full production following local water and electricity supply disruptions, coinciding with the start of a 2-month turnaround at the Delek facility in Tyler. The largest refineries along the gulf coast seem to be back up and running, which is keeping this from being a widespread disruption, but others may be forced to change their maintenance plans, which could keep supplies tighter than normal throughout the winter. 

RIN prices continue their recovery rally this week, with D6 values back in the mid $1.70s, having earned back most of the value lost following the EPA’s quota proposal for the next few years. D4 values meanwhile have stalled out, putting the two different types of credits just 1-2 cents apart, which is a far cry from the 10-20 cent spreads we’ve been accustomed to for years. 

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