ULSD Futures Are Down 10 Cents So Far This Week And Lower Than Normal Refinery Runs Across the US So Far

After 2 days of selling to start the week, WTI is trying to lead the energy complex in a recovery rally but is finding refined products to be reluctant participants in the early going. ULSD futures are down 10 cents so far this week and are the only contract holding in the red so far this morning. Diesel prices have lost 35 cents since peaking a month ago and look weak both technically and seasonally. RBOB futures are down a similar 8 cents so far this week, but unlike diesel the charts and seasonal influences for gasoline are still favorable for a run higher this spring, with the $3 mark an easy target to peg.

Reports that Saudi Arabia is raising its prices to Asian buyers seems to be helping encourage the bid in both WTI and Brent grades this morning, even though the move was largely predicted following the OPEC output cut extension, and only amounts to 20 cents/barrel.

The API reported a draw of gasoline stocks of around 2.8 million barrels last week while diesel stocks fell by 1.8 million and crude oil stocks had a small increase just under ½ million barrels. The DOE’s weekly status report is due out at its normal time this morning and isn’t scheduled for any more weekly delays until after Memorial Day.

The EIA this morning highlighted the lower than normal refinery runs across the US so far this year caused by a variety of weather and power issues, on top of a busy scheduled maintenance season in Q1. We should see those run rates start moving appreciably higher over the next couple of weeks as 3 of the top 10 refineries in the country are ramping back up, and crack spreads have improved notably in most markets which should allow those facilities that cut runs in December to ramp up run rates if they haven’t already done so.

While the reduced refinery runs have helped keep a lid on inventories despite the sluggish winter demand season, we’re already seeing distillate cracks in particular come under pressure as those large refiners come back online, while gasoline cracks are benefitting from the change to summer gasoline grades, which also limits the amount of blending that can be done, and thus total output.

A fire was reported at the Husky/Cenovus refinery in Lima Ohio Tuesday morning. No word yet on what units may have been impacted by the blaze, or what if any operational impacts there will be. This is not to be confused with the Husky/Cenovus refinery in Toledo that killed 2 workers in a fire in September 2022, or the Husky/Cenovus refinery that exploded and forced Superior Wisconsin to evacuate a large part of the town in 2018.

Both Flint Hills and Valero reported upsets at their Corpus Christi area refineries in the past 24 hours. Flint Hills reported a brief trip in a Flare Gas recovery unit that lasted just over an hour, while Valero reported multiple units initiated shutdown procedures due to a power disruption.

RIN values have bounced modestly this week after Chevron announced it was closing two of its biodiesel plants due to a lack of enough government subsidies necessary to make turning soybeans into diesel profitable. Biodiesel is widely viewed as the weakest link in the renewable fuel world, lacking the favorable characteristics or scale of Renewable Diesel options that use the same feedstocks, and more closures (on top of those we already saw last year) are expected even if the EPA increases the RFS mandate, since the $1/gallon Blender’s Tax credit is going away next year, and many facilities don’t have a low enough CI score to qualify for much under the new clean fuel production credit program.