RBOB Gasoline Futures Are Leading The Move Lower, Dropping 9 Cents Since The High Print Set Sunday Night

Energy markets are sliding for a 2nd day, giving back most of last week’s gains as supply concerns seem to be ebbing, while sluggish demand concerns remain. Equity markets are also pulling back slightly after reaching record highs last week, giving a sense that the risk-on-rally has run out of steam.

RBOB gasoline futures are leading the move lower, dropping 9 cents since the high print set Sunday night. Adding to the bearish sentiment on gasoline prices this week are reports that despite a recent rise in refinery attacks, Russia is removing restrictions on gasoline exports through the end of June. RBOB futures are now just over a nickel away from another test of the 200 day moving average, which helped propel last week’s bounce. A break below that level opens the door to another 20+ cents of downside in the next couple of weeks. It’s hard to imagine we’ll see that slide heading into a holiday weekend that kicks off the driving season, but a slump following Memorial day is not uncommon.

In the latest sign that refiners see the future in “other” liquids besides gasoline and diesel, Phillips 66 announced it was acquiring Pinnacle Midland, a natural gas gathering and distribution firm for $550 million. P66 said the transaction will “align with long-term objectives to build out our natural gas liquids value chain.” Take a look at the Propane and Propylene export figures in tomorrow’s DOE report and you’ll see another example of how the “other” refined products are becoming the drivers of growth and profitability while the traditional refined fuels continue to stagnate.

Capitalism vs Socialism: The EIA this morning highlighted the rapid growth in oil output coming from Guyana in the past few years, a stark contrast to its neighbor who has seen oil output plummet – despite having the world’s largest oil reserves – after the country nationalized its oil projects in 2007. That divergence is threatening the latest flare up in the global oil drama, with Venezuela building up military infrastructure near the border with Guyana and threatening to annex part of the country.

RIN Values rallied north of $.50 for D4 and D6 values Monday for the first time in 6 weeks. There wasn’t a piece of news to pin the rally on as their often is with the political football known as the Renewable Fuel Standard. A week ago a federal court rejected one of several lawsuits over the RFS, keeping the 2020-2022 mandates intact. In addition there is a sense that recent cut backs and closures of renewable facilities unable to maintain profits without high subsidy values will reduce the RIN excess in the back half of the year.

Exxon reported a fire at its Joliet IL refinery over the weekend, but operations appear to have been minimally impacted as basis values in the often-manic Chicago market barely flinched following that news.

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