Refinery Upset Started Rolling In Tuesday As The Winter Storm Sweeps Most Of The Country
It’s another mixed bag for energy contracts to start Wednesday’s session, with charts stuck in neutral territory and traders playing a wait and see game as the country faces down a big winter storm, and a great deal of uncertainty in the coming weeks as the US and Canada both experience executive transitions.
Refinery upset started rolling in Tuesday as the winter storm sweeps most of the country. In Texas there are reports from both refineries in the panhandle (Valero McKee and P66 Borger) in addition to new upset reports from Total in Pt Arthur and Valero in Three Rivers, both of which had been having problems before this most recent weather event. In addition, Energy News is reporting that Shell is dealing with an upset at its Norco LA refinery in the past 24 hours. Those upsets haven’t had much of any impact on spreads at this point, and in fact the time spreads for futures have dipped this week after a strong storm-induced rally, so it seems like the demand disruption may still be worse than the supply impacts this week.
The API estimates showed the holiday hangover for refined products continued last week with gasoline inventories climbing by more than 7 million barrels, while distillates were up by 3.2 million barrels. Crude oil stocks were estimated to decline by 4 million barrels, which was certainly aided by shippers reducing positions by holding shipments offshore to avoid the year-end property tax on fuel inventories in Texas.
The EIA’s weekly status report is due out at its normal time this morning. In addition to the normal Wednesday release of the Petroleum status report, the EIA is also releasing its natural gas storage report at noon, a day earlier than normal, to avoid a conflict with tomorrow’s national day of mourning for Jimmy Carter’s funeral. As a reminder, most federal offices are closing, along with several markets like US stocks and interest rate markets, but energy markets, the federal reserve and most banks will remain open.
Want to see another impact of the first wave of winter storms hitting the US this week? Look at the Group 3 ULSD basis chart below that shows what happens when trucks stay off the road and bidders for diesel disappear. So far the slide is nowhere near as dramatic as what we saw this time last year, and for those refiners that were forced to cut runs when basis values dipped below -50, the back half of this week will be a nervous ride.
The US Treasury Dept released final rules on two new clean electricity credit programs that took effect starting Jan 1 (tax codes 45Y and 48E), but still have not released their guidance on the Clean Fuel Producer Credit (45Z) that is replacing the Blender’s Tax Credit which expired at 12/31.