Energy Markets Jumping Again To Start Thursday's Session

Energy markets are jumping again to start Thursday’s session as the world anxiously awaits Israel’s promised response to Iran’s missile attack.

Yesterday’s DOE report had some ugly demand figures, and that news helped to wipe out the morning gains for energy contracts briefly, but the buyers didn’t stay away long and pushed values up again heading into the close and through the overnight session. With 3 straight days of buying since Iran’s missile attack, there’s a feeling we may be seeing a “buy the rumor, sell the news” pattern that could see prices retreat sharply if the Israeli response shows restraint.

Thus far these attacks have not had any material impact on oil supplies, but the fear is always that escalation could spill over to disrupt more shipping traffic, particularly in the Strait of Hormuz which sees about 20% of all the oil used in the world pass through on a daily basis. Iran’s oil exports have grown dramatically in recent years as they’ve bypassed US sanctions, but their rivals in Saudi Arabia would probably jump at the opportunity to replace most of those barrels if needed given their production cuts have had to last much longer than anticipated.

Marathon’s Carson (LA-area) refinery reported a week’s worth of planned flaring to South Coast regulators Wednesday which is presumably how long it will take to repair the FCC unit knocked offline unexpectedly earlier in the week. LA spot markets didn’t have a huge reaction to that latest upset. Meanwhile, the California senate will soon debate the proposed plan to enforce minimum inventory levels on the state’s refiners after that scheme made it through its first regulatory hurdle. That plan proposed by the CEC’s army of Ph. D.s will provide an interesting test in economic theory, with unintended consequences likely the only sure result.

As cleanup and recovery efforts continue following Hurricane Helene, prompting Georgia’s governor to suspend the state’s gasoline and diesel taxes, three other storms are being tracked by the NHC. Hurricane Kirk and Tropical Storm Leslie were both named in the past few days, but both storms are forecast to hook north and stay out to sea without coming anywhere close to the US. There is another potential system brewing in the Gulf of Mexico that’s given 30% odds of developing in the next week, down from 40% odds given yesterday.

Perhaps the most notable item outside of the ugly demand for gasoline and diesel in yesterday’s DOE report was the huge drop in PADD 2 refinery output. That drop came on the heels of numerous planned turnarounds stretching from the Great Lakes to Oklahoma, along with some unplanned disruptions in the Chicago area. While both Group 3 and Chicago spot markets are holding premiums to futures, they’re minimally compared to what we often see this time of year as the fall harvest and turnaround seasons converge.