Modest Gains For Energy Prices

Energy prices are sporting modest gains this morning after yesterday’s announcement of non-compliance from a rogue member of OPEC dropped oil prices nearly 2% in Wednesday trading. Kazakhstan’s newly appointed energy minister asserted the member nation’s autonomy and self-interest in regards to its oil production, and will resist the cartel’s directive to voluntarily cut production. While oversupply concerns are being blamed for the selling action seen in the futures market yesterday, traders took the night to remember OPEC+ was planning on ramping production anyway. The crude oil benchmarks are leading the way this morning with WTI and Brent both up around 1%; gasoline and diesel futures trail with ~.5% gains.

The Dallas Fed’s Beige Book, released yesterday, noted that while the energy sector is expanding moderately, there are concerns about an impending contraction coming on the heels of lower oil prices and increased resource costs due to tariffs. Read the full report here.

Valero officially announced its plan to close its Benicia refinery in 2 years time. The initial bulletin released last week presented three options in regards to the fate of the plant (idle, restructure, or cease operations), but the refiner’s Q1’25 results published today states the official intent is to cease operations. We’ll find out if the refinery’s ultimate closure was priced into San Francisco current basis differentials once the West Coast wakes up.

More from the DOE report:

Crude stocks stayed close to flat on the week with a big drop in export activity being offset by a larger uptick in demand. Refinery runs increased across all PADDs except 4, marking the largest week to week increase of the year and setting rates just ahead of a seasonal high set last year. PADD 1 saw P66’s Bayway refinery come back online after a couple months of downtime, but overall run rates have held below average despite the increase. Outside of PADDs 1 & 5, run rates elsewhere are well above their 5-year averages, particularly in PADD 3 where they’re pacing about 360 thousand barrels per day ahead of last year’s seasonal high. All PADDs except 2 also added capacity for a net increase of 62 thousand barrels per day, 48 kbd of which came out of PADD 3.

Total diesel stocks declined a little over 2 million barrels as is typical headed into May but are dwindling at a quicker pace than the previous two years and sitting just below the bottom end of the 5-year range. Across the board draws dropped gasoline inventories 4.5 million barrels due to an upswing in demand to a 2025 high, similar to the increase in the same week of 2023. Most PADDs are below their 5-year averages, PADD 5 in particular hitting a seasonal low, while PADD 2 is on its sixth week of steady declines and only ~2 million barrels above the 5-year average.