Energy Markets Are Taking A Breather This Morning With Prices Hovering Near Break Even In Early Trading

Energy markets are taking a breather this morning with prices hovering near break even in early trading after 2 days of heavy selling to start the week. The big sell-off so far this week has kept the bear market alive on the weekly charts for refined products, setting up another potential test of the $2 range for ULSD futures and $1.85 for RBOB as we head into the winter demand doldrums.

While California’s governor is experimenting with Chinese-style inventory minimums to theoretically lower fuel prices, California’s Air Resources Board announced its latest plan to artificially increase fuel prices by removing 180 million credits from its cap and trade budget, and increasing the price of its cost-containment program. The California Carbon Allowances (CCAs) which are the made up credits used by that program rallied to a 6 month high following that announcement, which will begin showing up as an increased line item cost on fuel invoices beginning today. LCFS credits meanwhile rallied north of $70/credit for the first time this year as CARB also plans to make that program more restrictive, and as reductions in renewable production over the past few months have led to less credits being produced.

The NHC continues to track 2 potential storms that could theoretically get into the Gulf of Mexico next week, although both are still given low odds of developing and the system with the higher 40% chance appears set to either hook north out to sea, or west into Central America and not threaten the US coastline. See the spaghetti models below courtesy of weathernerds.

The DOE’s weekly status update will not be released until Thursday thanks to the fake holiday Monday. Yesterday the agency published a note highlighting the bleak margin environment for refiners, who have been warning of harsh drops in their earnings when the Q3 reports start coming out in another week or so.

Delek reported another upset at its Big Spring TX refinery, which has become a frequent flier on the TCEQ flaring alerts. This upset was in a sulfur recovery unit and was caused by an equipment malfunction.

One person was killed in a fire at an Iranian oil refinery Tuesday, after a tanker truck apparently ran into gasoline tanks at the facility. While the world remains on high alert for Israel’s promised attack against Iran, there are no signs yet that this event was related in any way.