Crude Oil And Gasoline Prices Attempt To Regain Balance After Tuesday's Wipeout

Gasoline and crude oil prices are trying to find their footing after Tuesday’s wipe out led to more modest selling on Wednesday, while diesel prices continue to languish just a few cents above their lows for the year. Yesterday’s DOE report did little to assuage the fears of recession that have been gripping markets this week with a big slide in demand estimates and inventories that are healing much faster than most predicted this year. 

The DOE’s estimate for diesel demand plummeted to the lowest level of the year last week, dropping far below its seasonal 5-year range. Gasoline also saw a decline in its demand estimate, dropping from a healthy top of range figure last week to below the 5-year average last week. While a single week’s data point from the DOE can be misleading, particularly the “implied demand” figures which are simply an estimate based on the remainders left behind from the other reported figures from suppliers, there is no doubt that the demand trend for 2023 is troubling for suppliers thus far. 

Refinery runs ticked modestly lower for a 4th straight week, but the changes are very small and amount to not much more than rounding errors.  The increased capacity at Exxon’s newly expanded Beaumont facilities are still not showing up in the numbers, despite reports that the new units are online, which suggests we could see a large increase in refinery runs in the coming weeks.  It’s also interesting that PADD 4 refinery runs dropped noticeably last week, despite the fact that Suncor is restarting its commerce city facilities after a 2-month shutdown.

Gasoline and diesel exports both saw healthy increases last week but remain in their seasonal ranges and not pushing record highs like they did for much of last year when the world started scrambling to replace Russian supplies. The EIA’s This week in Petroleum note highlighted the record setting exports of refined products from the US last year and detailed how Propane and HGL’s are taking more share of those product flows.

That report also shows that US retail prices for diesel dropped below year-ago levels last week, as pump prices finally caught up to the plunge in wholesale values this year and we’re now comparing prices to last year’s chaotic events that were smashing records for volatility and daily price swings.

US Crude oil inventories did see their first weekly decline of the year, even though refinery runs and exports both declined. Oil production did see a small decline, but the main driver was a huge drop of 2.6 million barrels/day in the “adjustment” factor on inventories for the week.   

French pension strikes continue to limit fuel output at several refineries, while some other facilities report they’ve still been able to operate this week. The lack of reaction from fuel prices compared to what we saw last fall is another example of how supplies have healed in the past 6 months, and how reactions to events can differ greatly depending on the trend in place at the time.

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