Refined Product Futures Aim for Fifth Day of Consecutive Gains; RBOB & ULSD Still Near 3-Year Lows

Refined product futures are trying to go 5 for 5 with daily gains this week, trading up about a penny in the early going Friday. We saw some reversal-Thursday selling yesterday morning, but those losses gave way to minor gains for products by settlement, while crude oil futures finished slightly lower.

The 9 cent gains in RBOB and 12 cent gains in ULSD this week have helped refinery margins tick modestly higher, but they continue to hover close to 3-year lows, with the worst of the US winter demand doldrums still ahead. The rally hasn’t done much to change the forward curves, although some modest strength in ULSD and WTI backwardation in the early part of 2025 has occurred.

Equity markets have been a mixed bag with the DJIA putting together its longest losing streak since April, while the S&P 500 and Nasdaq continue to hover near record highs. As has been the case for most of 2024, energy futures seem to be largely ignoring the moves in stocks with correlations between energy, equity and currency values all remaining weak.

Volatility in both energy and equity markets continues to slide, with both the VIX and OVX indices reaching multi-month lows this week. That lack of volatility has been bad news for many trading companies this year, with profits plummeting after setting records during the chaotic markets of 2022 and 2023. Of course, a billion dollar write down doesn’t help either, as Trafigura reported wrongdoing by its employees in Mongolia had wiped out nearly 1/3 of their earnings for the year.

Citgo reported an upset at its Corpus Christi refinery Thursday, with a loss of steam from a 3rd party impacting operations on an FCC and Sulfur recovery unit. The units were returned to normal operations in just a few hours so this shouldn’t have any noticeable impact on regional supplies.

Russia and India have agreed to a 10-year crude oil supply agreement for 500,000 barrels/day, giving Russia a certain buyer to avoid sanctions, and India’s rapidly growing refining sector access to discounted barrels.