ULSD Prices Are Leading A Modest Slide Lower In The Early Going

Energy markets are cooling off Tuesday as traders re-assess the potential impact of Libya’s latest export shutdown, and the added shipping disruption potential of the burning oil tanker in the Red Sea. ULSD prices are leading a modest slide lower in the early going, after leading Monday’s move higher, while the last remaining summer-spec RBOB contract of the year continues to hover around break even while winter grades see small losses.

Today’s pullback reinforces the neutral to bearish technical outlook on the weekly charts, with the big rally over the past 3 trading sessions unable to break the downward trend so far, leaving open the possibility of a slide below the $2 mark for refined products as we move into fall. There are just 4 trading days left until the end of the driving season, and the RVP transitions are already underway. Today marks the first day of scheduling winter-grade gasoline on Colonial pipeline, so USGC spot markets are set to begin seeing lower prices this evening.

San Francisco basis values continued their strong rally Monday, with both CARBOB and CARB #2 differentials adding more than 30 cents in the past week since reports of the upset at Valero’s refinery in Benecia. LA spot values have rallied in sympathy with their neighbors to the north, but are still trail by some 15-20 cents/gallon. That upset will give California’s officials a real world opportunity to test their recent theories on how best to mandate refinery inventories. There are still more than 2 months to go before California markets transition to winter grade gasoline, unless of course the governor intervenes again this year to waive summer-spec requirements early.

We’re 2.5 weeks away from the typical peak of hurricane activity in the Atlantic basin, and the NHC is once again tracking a potential system. This latest area of potential development is given just 20% probability of being named in the next week, but it’s in the right area to become a potential problem for the US if it does beat those low odds

Shocking. Pemex officials announced that their new[ish] Dos Bocas refinery would reach full capacity in August, and yet the facility is processing at less than 20% of its crude intake capacity and still not making any gasoline. That lack of production is one of the few bright spots for US Gulf Coast refiners who are struggling with weak margins, and are heavily reliant on Mexican imports to take their excess gasoline output.