Gulf Coast Run Rates Held Above Their 5 Year Seasonal Range For A 2nd Week

More choppy action in energy markets as traders seem to be moving into a nervous wait and see pattern with the US election less than 2 weeks away, and the other shoe waiting to drop in the Middle East after new reports suggest Israel delayed its retaliation on Iran due to intelligence leaks, while its leaders continue to promise a memorable response.

Yesterday’s DOE report showed US oil production held at a record high of 13.5 million barrels/day for a 2nd straight week, despite the large drop in drilling activity this year.

The US continued to export more than 10 million barrels per day of petroleum last week, 4 million barrels of crude oil and 6.4 million barrels of refined products. The rapid increase in exports over the past decade show how the increased sophistication at domestic facilities allows the lighter barrels coming from the Permian to be sent overseas to less-complex facilities, while many US plants can continue benefitting from buying discounted heavier grades while still operating at relatively high run rates vs many international facilities.

PADD 2 had a large increase in run rates last week as multiple facilities returned from fall maintenance. Many of those midwestern facilities continue to enjoy a substantial discount for purchasing Canadian crude grades, as the new Transmountain pipeline has been filled and producers have continued increasing output to push more barrels south. That resilient crude advantage may spell another ugly winter for mid-con suppliers who will struggle to find a home for their gasoline and diesel. Gulf Coast run rates held above their 5 year seasonal range for a 2nd week, as those facilities seem to be betting on continued strength in the export market to offset sluggish domestic demand.

Charts from the DOE’s weekly report are included below.

Valero kicked off Q3 refiner earnings releases this morning with the expected weaker results. The company’s net profits dropped 86% from a year ago as refining and renewable margins both faced headwinds. The company did highlight the completion of their SAF project at their JV Diamond Green renewable facility in Port Arthur that will allow for up to half of the facilities 30mb/day of RD to be converted to SAF. If full SAF output is reached, that means roughly 630,000 gallons less RD being produced daily, which is one of several reasons the West Coast has seen a rapid tightening of RD supplies this month. The company’s West Coast refineries showed negative earnings for the quarter, which will no doubt fuel more speculation on the future of those facilities.

Neste reported this morning it was withdrawing its investment in renewable hydrogen at its Porvoo Finland refinery due to challenging market conditions.