RBOB Gasoline Futures Are Trying To Lead The Energy Complex On A Recovery Rally Early Friday

RBOB gasoline futures are trying to lead the energy complex on a recovery rally early Friday, after Thursday’s attempt fell flat, leading to fresh multi-year lows. The next few days may prove critical for the price action this fall, as a failure of support near current levels could lead to another 15-20 cent drop in diesel prices, with gasoline charts suggesting an even steeper decline. This sell-off has already been brutal for many refiners with crack spreads once again flirting with single digits after factoring in RIN obligations, so a bounce will be critical for some to avoid forced run cuts.

Both energy and equity futures saw small incremental gains following the August payroll report this morning that estimated 142k jobs were added in the US last month, but that move proved to be short-lived. Continuing with their trend over the past couple of years, the BLS revised previous estimates sharply lower, cutting the combined number from June and July by 85,000 jobs. The headline unemployment rate was lowered a tick to 4.2%, while the less-manipulated U-6 rate ticked higher to 7.9%. The CME’s Fedwatch tool showed the odds of a 50 point rate cut at the September 18 meeting jumped to 50% following this report, up from 40% yesterday.

Yesterday’s DOE report was largely shrugged off as refined products saw minimal change and a big drop in crude inventories was easily explainable by a drop in imports that is likely to correct in the next week or two. Refinery runs continue to tick higher despite plenty of planned maintenance and several upsets in the past week, while gasoline demand was certainly a disappointment for a pre-holiday week.

While most of the country will get to celebrate the lowest gasoline prices in nearly 3 years, California fuel buyers are once again going to feel the strain of being the only state requiring 6lb RVP CARBOB gasoline in September. The basis rally continued Thursday with San Francisco spot CARBOB trading at a premium of 95 cents over futures, while LA values ticked up only slightly to a 47 cent premium. Values in both markets remain well below the $1-$2/gallon premiums we saw the past couple of years (for now…) which formed the basis for the governor’s argument that refiners should be forced to hold minimum inventory levels. Of course, last year’s decision to waive the RVP requirements a month early will also loom large as any price spike will be met with similar expectations to forget about the environment for a few weeks.

The NHC is still tracking 4 potential storm systems in the Atlantic, but none of them are given more than 20% odds of being named as of this morning. The system hovering off the Texas Coast is expected to dump 12-18” of rain on the country’s largest refineries which will likely cause some power and vessel disruptions, but so far there are not any reports of new refinery upsets. Similarly, the system moving off of the East Coast isn’t expected to get a name, but will bring heavy rain and rough seas that could cause some vessel delays in waterborne terminals and provide cover to refiners that don’t want to buy any more low RVP product before the transition in 10 days.

The latest refiner to be burned by delusions of grandeur. Vertex announced this morning that its CCO was stepping down after a catastrophic 18 months for the company who attempted to jump on the RD bandwagon.