Energy Markets Hover Near Break-Even As RBOB Futures Eye 7-Day Rally

Energy markets are hovering near break-even to start Thursday’s trading, as RBOB futures attempt to stretch their rally to a 7th consecutive day while stock markets weigh the impact of the latest shots fired in the tariff wars.

The Dallas FED released its monthly energy survey, and industry executives didn’t hold back in their criticism of the new administration thanks to the anonymous nature of the report. While essentially all of the respondents confirmed they can be profitable at current oil prices, it’s clear that it will take significantly higher prices to boost drilling activity.

“The administration's chaos is a disaster for the commodity markets. "Drill, baby, drill" is nothing short of a myth and populist rallying cry. Tariff policy is impossible for us to predict and doesn't have a clear goal. We want more stability.”

RBOB futures came within 29 points of their March high during Wednesday’s rally, but have so far been unable to mount a sustained challenge of that resistance. If prices do break through there appears to be clear sailing on the chart until prices get to the $2.50 range. If this is where the momentum stalls out after 6 days however, there’s a good chance we’ll see a 10 cent pullback in the next week or so.

California gasoline basis levels continued their latest spike Wednesday as lingering refinery issues coincide with the spring demand ramp up. San Francisco CARBOB values are leading the move so far, trading close to a 55 cent/gallon premium to RBOB futures, while LA spots are approaching a 40 cent premium. The drop in refinery runs was evident in the DOE’s weekly report with PADD 5 throughput down more than 11% on the week.

The weekly status report appeared to be largely shrugged off by the market Wednesday with only minor moves in futures following the report. Both gasoline and diesel inventories saw small declines on the week, despite a drop in the demand estimates for both products, lower exports outweighing softer imports, and a tick higher in nationwide refinery runs. Gulf Coast refiners continue to run above their 5 year seasonal range despite the loss of the 260mb/day Houston Refinery last month, while PADD 1 saw a 12% increase in what appears to be the first sign of restart from plants undergoing spring maintenance after nearly a month of significant downtime.

Ethanol production slipped last week, but is holding near the top end of its seasonal range, and inventories continue to hold near all-time highs.

RIN values ticked up to their highest levels of the month this week with D6 values bid at 77 cents/RIN while D4s are holding near 82 cents. The Supreme Court heard testimony this week on the debate of venue for appeals claims to the Renewable Fuel Standard’s small refinery exemptions, which have been dragging on through the court system for nearly a decade. As the table below shows, there were numerous exemptions granted during the first Trump administration, but 105 of those granted exemptions were later rejected in 2022. There is a great deal of uncertainty how the new administration’s EPA will handle both the pending exemption requests, some of which date back to 2016, and the RFS targets which have yet to be established for 2026 and beyond.

More commentary on the weekly DOE report.

The crude balance is actually pretty close to matching the net of imports, exports, demand, runs, and the adjustment factor last week with the big downswing in the adjustment being the main driver of the 3.3mm bbl draw.

Refinery runs came back strong in PADDs 3 & 4 and both are above their 5-year range. PADD 1 also had a solid percentage bump but is still hanging below the 5-year range.

PADD 5 saw a big drop from already below average levels with PBF Torrance work continuing through at least the end of this week.

Small moves in diesel stocks for a net draw with demand sliding and imports dropping to the lowest level this year. Overall inventories have dropped below the previous two years and are running along the bottom end of the range. PADD 5 had a big drop in traditional diesel that pulled inventories back down below the 5-year range after hitting the average line the week prior, but when including the RD stocks are still holding above average levels despite the drop last week.

Gasoline stocks are still sitting near the top end of the range despite all PADDs but 3 cutting inventories last week. PADD 3 went on a 7-week seasonal slide to the bottom of the range but has bumped back up to average over the past couple weeks. Most other PADDs are following their seasonal trends but running ahead of the previous two years except PADD 5 where stocks have run under the 5-year range virtually all year. The loss of production seems to be the cause for the stock draw as demand is down below average and exports dropped to the lowest level of the year last week.