RBOB Gasoline Futures Plummeted To Their Lowest Levels Since February

RBOB gasoline futures plummeted to their lowest levels since February Wednesday after a report from the US government made the biggest downward revision in payrolls since the great recession of 2009.

Lies, Damned Lies and [The Bureau of Labor] Statistics: Conspiracy theorists and ordinary analysts have both been highlighting the pattern of downward revisions in the BLS monthly payroll estimates over the past couple of years. Yesterday we learned that the error was actually much worse than expected as the agency announced a 30% drop in the actual number of jobs added over the past year. That news sent shockwaves through many markets, and seemed to particularly impact gasoline prices as suddenly there were more than 800,000 fewer people commuting to work in the US than we believed.

This news is particularly bad for refiners considering this drop in gasoline cracks is happening during the summer time when demand is highest and supply is constrained by RVP requirements, and gives a particularly ominous feel for what might happen to their margins as we approach the winter, especially now that diesel contracts have come back to reality.

That news overshadowed some relatively strong figures from the DOE that showed inventory declines across the board, a tick higher in consumption and a drop in refinery runs across most PADDs. Perhaps most notable in the report was that US diesel exports reached a record high last week north of 1.8 million barrels/day, which was foreshadowed by recent strength in basis markets.

San Francisco spot markets rallied Wednesday after reports of an upset at Valero’s refinery in Benecia. The Bay area had 5 refineries active just a couple of years ago, but today only has 3 after Marathon and P66 both converted their facilities to Renewable Diesel output, meaning even minor events have more potential impact on prices and allocations. Don’t worry though, California’s governor has your back, and you can attend a workshop later today to hear about how the state plans to mandate minimum fuel supplies for the state’s refiners. No doubt the Chinese refiners anxious to sell their excess supply will be in attendance.

Speaking of markets with concentrated refinery capacity: If you want a visual gauge of how important the Joliet refinery is to the Chicago market, take a look at the big swings in PADD 2 refinery runs over the past few weeks after that facility was knocked offline by a tornado. The big jump in run rates last week as that facility came fully back online suggests the brief respite for suppliers slogging through a year of excess supply in the region is likely coming to an end. The EIA also took the opportunity to highlight that phenomenon in this morning’s “Today in Energy” brief.

BP was awarded a $27 million grant this week to produce SAF at its Cherry Point WA refinery despite the fact the company just announced it was pausing construction on that project due to weak economics.