We’re Seeing Overnight Losses Turn Into Morning Gains For A Third Straight Session

We’re seeing overnight losses turn into morning gains for a third straight session as the US East Coast continues to grapple with tight supplies of gasoline and diesel that are giving traders plenty of reasons to buy any dip.   

What’s different about the rallies this week is it has been RBOB more than ULSD leading the charge as the East Coast shortages are suddenly worse on gasoline than they are for diesel, with numerous short term terminal outages of RBOB and ethanol reported in the region over the past 72 hours due to various supply delays.

November RBOB futures saw a 24 cent rally from low to high Tuesday, the biggest jump in prices since the chaotic trading in May. The November/December RBOB spread surged past 35 cents during that rally, proving that the rally is more short squeeze caused by a variety of disruptions in supply, rather than an expectation of strong gasoline demand. 

Premiums to ship product on Colonial pipeline for both gasoline and diesel remain in positive territory for the first time since May as refiners struggle to find ways to move product from the Gulf Coast to the East Coast.  

Who needs more pipelines anyway? While Europe continues to struggle with supply shortages and extremely high prices, natural gas producers in West Texas are now having to pay buyers to get rid of their product as pipeline maintenance reduces outlets for that fuel.  

The API reported a build of 4.5 million barrels of crude oil inventory last week, thanks to another 3 million barrel release from the SPR, while gasoline stocks declined by 2.3 million barrels and distillates ticked slightly higher by 635k barrels. The DOE/EIA’s weekly report is due out at its normal time this morning.

A couple of interesting notes from Valero’s earnings call Tuesday (Besides the $2.8 billion in quarterly profit) was that the company expects more SPR releases from the US (of which they’re a major buyer) and they don’t expect any of the refineries shuttered in the past couple of years to come back online.    

Speaking of which, an EPA report on the shuttered refinery now known as Limetree Bay (formerly known as Hovensa) suggests that the odds of that plant ever operating again are slim to none. Don’t worry though, China is starting up one of its new refineries this week, and we know how they like to play nice with the rest of the world.   

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