Today Is The Last Trading Day For September RBOB and ULSD Contracts

Refined products are attempting a 2nd day of recovery after their mid-week selloff pushed prices to multi-month lows. Reports of multiple refinery upsets and discussions of inevitable economic-based run cuts are both seeming to contribute to the price bounce as the summer driving season comes to an end.

Futures will trade in an abbreviated session Monday, but spot markets will not be assessed, so most rack prices will hold tonight through Tuesday unless there’s some excitement over the holiday weekend.

Today is the last trading day for September RBOB and ULSD contracts, which also means it’s the last day a summer-grade gasoline contract will be in the prompt position this year. Right now the summer/winter spread is around 14 cents/gallon, but physical prices around the country won’t make that move until their respective hubs make their transition, most of which will happen over the next 2-4 weeks.

The Chicago market will get to partially transition early this year as the EPA granted a 3rd waiver on summer-grade RVP for 4 states in the region following the extended shutdown of Exxon’s Joliet refinery last month. The new end date of the waiver is September 15th, which is a day before the winter grades are normally allowed, which will prevent any refiners who have been selling 9lb products to shift back to lower polluting products for just 2 weeks.

While that move seems logical, the EPA’s other waiver this week is anything but. The agency made its 7th waiver of the summer for E15 gasoline blends, making a weak argument that the war in Ukraine and OPEC output cuts gave the agency statutory authority to pollute more by adding fuel most don’t want into a gasoline supply pool that’s already experiencing more excess than it has in 4 years. Of course, given the limited geographic spread of the higher blend, and the political tight rope walking of approving it starting in 2025, this waiver is just another small political move that most are too busy to care about.

Speaking of which, don’t be surprised if California issues another RVP waiver should refinery hiccups (like the one reported yesterday by Valero at its Wilmington CA plant) spur another basis spike in the coming weeks, as they have the past two years. Unlike most of the country, California markets typically won’t make the switch to winter grades until November physical movements, which exacerbates the fuel-island-phenomenon that is one of many contributing factors to the state’s high prices.

Yesterday the Western States Petroleum Association took its shot at the latest California refinery proposals, which essentially said that state officials were lying about how the plan was formulated, and noting several reasons of why it would fail.

Energy news today continues to outpace most other industry sources highlighting a fire at the Houston Refining complex overnight that has yet to be reported to Texas officials, and could be one of the last nails in the coffin for that facility set to close at year end. ENT has also been on the front end of reporting PBF’s plans to operate its Paulsboro facility at minimal run rates rather than shutting units, to try and muddle through the latest cycle of bad refining margins driven by soft demand and excess capacity.

The NHC is tracking 2 potential storm threats as we approach the peak of the hurricane season. The first is now given 50% odds of developing after being given just 20% odds 2 days ago. The potential for that storm to get into the Gulf of Mexico late next week is real, so it will need to be watched. The 2nd system is only given 20% odds, and seems to have a more northernly track so is much less likely to be a supply threat if it’s named.

Today’s interesting read: The history of a Czech refinery and the 80 year old bomb that was safely detonated this week and offering a reminder that military attacks on refineries are certainly not new. You can read a more in depth account of those air battles here.