Diesel Values Plummeting Nearly $1/Gallon On The Day After Setting A Record High Last Week And More Trouble In Corpus

Refined products are moving lower for a 2nd day while oil prices tread water after small signs of diplomatic progress led a sharp selloff Monday. While short term technical studies are mixed, there’s an argument that we’re set to see more selling soon if prices can’t break above last week’s highs, which would extend a 6-week bearish trend-line, despite the powder keg in the Middle East threatening to push prices higher. 

The Group 3 market stole the spot market show Monday, with diesel values plummeting nearly $1/gallon on the day after setting a record high last week when peak harvest demand coincided with several refinery upsets. Widespread rain and the first winter storm of the year are going to cause a pause in harvest demand this week and once the sellers emerged, differentials collapsed in a hurry with offers at 10 cents over futures just a few short hours after a trade at 105 cents over futures ($1.05/gallon) was confirmed. 

While nowhere near as dramatic as the move in the Midwest, West Coast diesel basis values have reached a 4-month low this week as resupplies have arrived in the region just in time for the start of the seasonal slowdown.

More trouble in Corpus. A power blackout caused both the Citgo and FHR refineries in Corpus Christi to be knocked offline Monday, with extensive flaring reported. This cluster of refineries has faced numerous issues over the past couple of months, which has led to several terminal allocations across the western half of the Texas triangle that they supply, although outages have been minimal.  Since those facilities aren’t directly connected to the Colonial system, they tend to have little if any impact on USGC basis values. 

USGC basis values have come under selling pressure in recent days as refineries return from maintenance and the export market for gasoline and diesel shows signs of slowing down while petrochemical and crude exports continue to increase. That drop in basis values has pushed up values for space on Colonial as producers need to find a home for their excess product.  Gasoline (Line 1) values reached a 5-month high north of 6 cents/gallon yesterday while Diesel (Line 2) values broke 2 cents/gallon for the first time this year. Charts below.

Today’s interesting read from TIME: Why playing nice with Iran to ease oil prices may be backfiring. 

An EIA note yesterday detailed why it will be slow going for Venezuela to resume oil exports following the US lifting sanctions. 

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