Annual Oil Production Records Broken

After a strong Wednesday rally, diesel prices are trying to lead the energy complex higher to start Thursday’s session. It’s Halloween, which means it’s also expiration day for November RBOB and ULSD contracts, which helps explain why prompt gasoline futures were trading lower most of the morning while every other contract in the complex is moving higher. Reminder for those in the NYH and Group 3 markets that haven’t already rolled to December futures reference points to watch the RBZ and HOZ contracts for direction today.

The DOE’s weekly status report estimated total US petroleum demand reached its highest level of the year last week, north of 21.6 million barrels/day. That total increase comes despite a 6% drop in estimated diesel demand for the week as the “other” petroleum liquids continue to take more market share.

The EIA’s estimate for total US crude oil production held steady at a record 13.5 million barrels/day for a 3rd straight week, keeping the country on track to smash the annual record for most crude oil produced by any country in the world. In addition to the record setting year for oil production, the US is also breaking records for total petroleum production including the rapid growth in NGLs and biofuels which is running close to 22 million barrels per day. Earlier in the week the EIA highlighted how US ethane production has tripled in the past decade to 3 million barrels/day, which is adding to the US dominance in total petroleum production and exports particularly in non-transportation uses. This morning the agency highlighted the increase in natural gas production from shale basins in the past decade, which is contributing to the rapid growth in NGLs as crude production has increased. See tables below.

Gulf Coast refiners continue to crank up their production, holding well above their seasonal range and offsetting a drop in production in the other 4 PADDs last week. The East Coast meanwhile saw a 7% drop in run rates last week in what may be the first sign of economic run cuts, and also a reason why Colonial linespace values are likely to stay positive for the near future.

HF Sinclair reported net losses in both its Refining and Renewables segments during Q3 with a total drop of more than $1.1 billion from the same quarter last year, while its marketing, lubes and midstream businesses all held steady.

PBF reported a similar billion dollar drop in its refining earnings vs last year, with a net loss of $289 million for the quarter compared to $794 million in earnings a year ago. The Company’s CEO said in that release that “The near-term gyrations experienced in our cyclical, commodity-dependent business do not reflect our broader outlook that global supply and demand balances remain tight. That delicate balance provides a constructive backdrop for the refining business going forward.” The company’s SBR renewable fuel JV is expected to increase output by 3-4mb/day in the 4th quarter after a catalyst change was completed in Q3. Gross margins for the company’s East Coast refineries was reported as negative $5/barrel, which is leading speculation that the recent drops in PADD 1 output are from PBF cutting run rates.