The Surge In Gasoline Inventories Pushed Total US Stocks To Their Seasonal 5 Year Average For The First Time Since July

It’s a mixed bag for energy markets Friday with small gains for gasoline and crude oil contracts, while diesel prices are seeing small losses after the entire complex saw a healthy wave of buying in the first trading day for 2025. Thursday’s strength in crude and refined products came in spite of some ugly fundamental data reported by the DOE, and has pushed both diesel and crude contracts to the verge of a short term technical breakout to the upside. Cold weather forecasts are helping the bullish sentiment for several contracts, while some skepticism is evident given that a healthy portion of the market won’t return to their office until next week.

Several outlets have pointed to commodity fund rebalancing in the new year as a driver of the bullish price action Thursday, and while there’s no mistaking the impact that fund flows can have on prices, those stories failed to note that two of the largest of the commodity funds (S&P GSCI and Bloomberg Commodity Index) were actually reducing the weighting in most energy contracts this year.

The surge in gasoline inventories pushed total US stocks to their seasonal 5 year average for the first time since July, with Gulf Coast stocks looking the most bloated moving all the way to the top end of their seasonal range after holding near the bottom of their range just 6 weeks ago. That excess gasoline on the gulf coast may become an issue if export demand slows, or if new competition from Dangote or other new refining capacity continues to expand. On the plus side for Gulf Coast refiners, Lyondell still appears to be starting the permanent shut down of Houston Refining, which will take about 250mb/day of capacity offline over the next few months. That looming shutdown may explain why PADD 3 run rates held at the top end of their seasonal range through year-end, even with margins being challenged and the winter demand doldrums looming.

Diesel saw an even bigger demand drop that gasoline did last week, which is not uncommon for the lost week between Christmas and New Years when many operators simply close up shop for the holidays. Distillate inventories don’t look nearly as swollen as gasoline, but it’s important to continue noting that Renewable Diesel stocks are not yet included in the weekly figures, which adds somewhere between 5-6% to the total, which would put total distillates right around the 5 year average levels, while the “official” charts show them near the bottom end of the seasonal range.

Ethanol production is holding well above its seasonal norms as domestic producers prepare for the nationwide push of year-round E15, despite the fact that the product pollutes more in the warmer months. That new supply in the gasoline pool will prove an early test for PADD 2 refiners who most directly compete with the corn-to-sugar-to-alcohol-to-fuel, and could be another nail in the coffin of smaller facilities in the region unless their Canadian crude buying advantage holds up through the Trump tariff and Transmountain threats.

See the attached PDF for charts of the DOE’s weekly status report. Hat tip to Matt Allen for the new and improved format.

Phillips 66 notified California regulators of 3 weeks of planned flaring starting Monday as it undergoes maintenance at the Wilmington section of its LA refining complex. That facility has been in the news a lot lately, both for alleged dumping of waste water into LA’s sewer system and for its plans to shutter the facility at the end of this year.