Potential Ukraine Cease-Fire And Winter Weather Affect Fuel Prices

Diesel futures are trying to lead the energy complex higher to start Friday’s session, after pulling a sharp about face Thursday. It seems that the optimism of a Ukraine cease-fire that led to heavy selling has largely evaporated, which is contributing to the bounce in prices, along with more forecasts for harsh winter weather.

PBF said during its Q4 earnings call Thursday that it had not yet been able to access “Ground Zero” of the Martinez refinery fire due to local officials restricting access to the site. The company said it was planning to delay maintenance at its Los Angeles-area Torrance refinery to try and help make up for the lost output, only to report unplanned flaring at that facility later in the day due to a “Mechanical/Electrical Malfunction”. Basis values in the region had been pulling back from their elevated levels the prior two sessions, and now we’ll see if the latest PBF upset puts another bid into the market.

U.S. natural gas prices are rallying again this week after the latest storage readings from the EIA showed healthy draws pushing levels well below year-ago and the 5 year average inventories. European natural gas prices had reached a 3 year high earlier in the week before seeing a modest pullback. There’s another round of cold weather coming for large parts of the country next week, but it’s only forecast to last about 48 hours, so it may not have the same impact on heating fuel demand as the cold snap that hit in January.

Meanwhile, winter storms are expected from coast to coast over the next few days which is expected to hamper travel across large parts of the country. For the Los Angeles area, heavy rains are adding insult to injury after the wild fires with mudslides a real concern. The East Coast meanwhile is setting up for its 5th storm system in a week with more ice and snow on the way for the weekend.

The U.S. levied import tariffs on Brazilian ethanol, in the latest of the “reciprocal tariff” announcements that may or may not ever happen. Meanwhile, a group of U.S. senators is lobbying the EPA to allow year-round E15 sales, while others are asking the EPA not to waive the 1lb RVP waiver as requested by 8 U.S. states, which will likely cause supply disruptions this spring.

Neste announced it would be cutting 600 jobs after posting a loss in Q4 as biofuel credit prices and tax credits have all moved sharply lower.

The EIA published a note Thursday highlighting how oil production in the U.S. and other Americas was rapidly offsetting OPEC supply in recent years. Guyana has become the little engine that could with huge off-shore finds, proving the value of both the oil reserves in the region and in not having a dictatorship like its neighbor Venezuela. An RBN blog post earlier this week suggests that Guyana’s other coastal neighbor Suriname was poised to follow in its footsteps with rapidly growing oil production off-shore.

A Bloomberg note this week highlighted the completion of a debottlenecking project at Motiva’s Pt Arthur refinery which allowed it to officially take back the title as the largest refinery in the U.S. The facility is now capable of processing 654mb/day and ran just below that level in December.

Meanwhile, another explosion at a US refinery Wednesday night knocked out power to the entire local community. The Wyoming Refining Company facility, now owned by Par Pacific, is located in New Castle WY, and operates at just 20mb/day capacity, so unless you’re visiting the Black Hills this weekend, you probably won’t see any impact.