Lackluster Rally In Energy Markets Continues

The lackluster rally in energy markets continues Wednesday with refined products once again trying to pull crude oil futures higher.

RBOB gasoline futures are ticking higher for a 6th straight day but have only moved up by a whopping 6 cents during that stretch, which shows that whatever optimism is driving the recent rally is cautious at best. The March intra-day high of $2.2489 still looks to be the pivotal level near term on the charts and is less than 3 cents above current values so we should find out this week whether or not the buyers are serious about this latest bounce.

Diesel prices have rallied in 7 of the past 9 trading sessions, adding 15 cents since bottoming out on 3/14. Short term charts suggest the bulls will want to make a run at the $2.34 chart gap left behind by the roll to April futures at the start of the month, and similar to RBOB that may become a pivot point that determines if we see a run at $2.50 or a drop back to $2.15 as we move deeper into spring.

Both Reuters and Bloomberg are reporting that India’s Reliance Industries is pausing its oil purchases from Venezuela after the U.S. threatened to add tariffs of 25% on any country that purchased that oil. Reliance operates the largest refinery complex in the world in Jamnagar at 1.4 million barrels/day capacity, and imports roughly 5% of that (approximately 67KBD) from Venezuela.

Values to lease space on Colonial’s main gasoline line jumped to a 3 month high this week after trading in negative territory for most of the year. In the past several years we’ve typically seen Line 1 values rally through the spring as shippers race to push barrels north during the spring RVP transition, but so far values are trailing year-ago levels by 1-2 cents.

Gasoline basis values on the West Coast are rallying again this week after P66 had an upset at its LA-area refinery over the weekend, and the repairs being made by PBF at its Torrance refinery were extended from 1 week to 2. Originally the plant filed flaring plans with AQMD regulators that would last from 3/18-3/25, but that work has now been extended to 4/2. LA Spot CARBOB values jumped 10 cents on the day, while San Francisco CARBOB rallied in sympathy as the loss of Torrance barrels directly impacts PBF’s ability to replace the loss of its Martinez refinery output which is expected to last most of the year.

Diesel basis values have not joined in on the rally however as the state’s output of CARB diesel surged to a 6-month high last week as producers take advantage of the sudden tightness in supplies caused by the collapse in RD production and imports this year.

The 130mb/day Federated Co-op refinery in Regina Saskatchewan suffered an explosion and fire Tuesday that injured two workers. It appears that the plants main structures avoided damage in the event, and given its remote location shouldn’t have any impact on U.S. spot or rack markets.