MARKETWIRE ALERTS

MARKETWIRE ALERTS 

MarketWire Afternoon News for March 19th:

Updated at 5:00 PM ET 

HEADLINES:

— Los Angeles ULSD Basis Jump 23cts on Active Trading

— SF ULSD Premium to RBOB Weakens

— Analysis: EIA Data Reveals Regional Vulnerabilities

— Analysis: Hormuz Closure Jeopardizes Diesel More Than Crude

— CEC: California Gasoline Stocks Fall 348,000 Bbl on Week

— CEC: California Diesel Stocks Fall 137,000 Bbl on Week

— EIA: US NatGas Storage Reports 35 Bcf Weekly Injection

— U.S. Rack ULSD Extends Rally 16.56cts as Gasoline Slips

NEWS:

Los Angeles ULSD Basis Jump 23cts on Active Trading

The basis of Los Angeles ultra-low sulfur diesel spiked by 23cts on Thursday (3/19) after a trade was reported at a 8ct premium against the NYMEX ULSD futures contract for May delivery.

This was a significant increase as Los Angeles ULSD basis flipped to a premium after recording an 11.5cts discount to May NYMEX ULSD futures in the previous trading session. 

Market participants did not cite a specific reason behind the increase.

SF ULSD Premium to RBOB Weakens

San Francsico ULSD differentials weakened Thursday (3/19) to a 5ct basis over May NYMEX ULSD futures, after a trade confirmed at that level.

The SF ULSD premium to May ULSD futures contract narrowed by 14cts from where it was last pinned, at a 19ct premium, to May ULSD futures on Wednesday (3/18).

The sharp decrease comes as the market rolls into the May front-month contract.

Analysis: EIA Data Reveals Regional Vulnerabilities

U.S. refined fuels supply is significantly less vulnerable to the ongoing oil supply disruption from the Middle East than Europe and Asia, who heavily rely on crude oil and product flows from the region. According to data from the Energy Information Administration, less than 8% of imported crude and 3% of refiner inputs stemmed from the Persian Gulf last year. EIA PADD- and company-level import data, however, reveal that fuel supply in some pockets of the country is much more exposed to the Mideast turmoil than the national average suggests.

Close to half of U.S. crude imports from the Persian Gulf last year went to the West Coast, where it makes up nearly 20% of imports and more than 11% of crude inputs. For two import-dependent refiners in California, who together account for more than a third of the state’s refining capacity, Iraqi crude oil in particular represents a major part of their diet.

According to EIA company-level monthly data, Marathon’s Los Angeles refinery in December received 2.94 million bbl of heavy sour crude from Iraq. Basrah heavy and medium made up more than a third of the refinery’s crude mix that month. Chevron’s 245,000 bpd capacity Richmond refinery received 3.25 million bbl from Iraq and Saudi Arabia, accounting for more than 40% of its crude diet in December.

A mix of Latin American and domestic oil would make for a good substitute for these mostly heavy sour grades, but South American barrels on the spot market remain limited, as does PADD 5’s capability of receiving oil from other parts of the country. Given the lack of pipeline connections to the rest of the country as well as different fuel specifications, the U.S. West Coast relies on imports and regional production to meet fuel needs, as the Jones Act renders domestic shipments via tanker economically unviable. This week’s suspension of the Jones Act, in place for 60 days, opens the window to domestic deliveries by tanker and, while not shielding the consumer from rising costs, is set to strengthen fuel supply safety on the West Coast.

Analysis: Hormuz Closure Jeopardizes Diesel More Than Crude

The closure of the Strait of Hormuz has impacted global diesel prices even more than crude oil prices, and for good reasons. Comparatively tighter inventories, the loss of millions of bpd of middle distillate supply from the Persian Gulf and the cascading effects of the sudden disruption of crude oil flows to Asian refiners have the potential to make the war-induced diesel shortage more severe than the one on crude oil.

Front-month ULSD prices have more than doubled since the beginning of the year and have shot up by 72% since the beginning of the U.S.-Israeli war on Iran, dwarfing even the associated rally in crude prices.

ULSD futures are now the most backwardated since the European Union announced an import ban on Russian petroleum products in October 2022. On Thursday (3/19), ULSD for April delivery on NYMEX hovered at $4.41 gallon, versus the May contract at $4.15 gallon. The June ULSD contract was further apart, at around $3.68 gallon.

The world was well-stocked with crude oil at the start of the conflict. The International Energy Agency in February estimated global observed inventories of total oil at a five-year high 8.2 billion bbl, the bulk of which was crude. Middle distillate inventories, in contrast, were much closer to historical averages, and European inventories have never fully recovered to pre-Ukraine war levels.

The Middle East has since the EU import ban on Russian oil and products become a vital supplier of diesel to Europe. The closure of the Strait of Hormuz is now effectively shutting in 4 million bpd of middle distillate exports from the Persian Gulf, and the war forced shut operations in some of the region’s largest refineries.

Middle Eastern crude oil makes up the bulk of many East and Southeast Asian refiners’ diets. The supply disruption led to refiners throttling operations and consequently to several countries imposing export bans on oil products, prioritizing domestic fuel supply. Among these was China, the region’s largest fuel exporter, which has ordered refiners to cease exports until the end of March.

The largest oil supply disruption in history is also easier, and more likely, to be eased on the crude than the diesel front. Commercial crude oil stocks are well filled, and strategic oil inventories consist mostly of crude oil. U.S. leadership has shown a willingness to loosen sanctions on oil exports from Russia and even Iran. The European Union, the main sink of Russian diesel exports before Russia’s invasion of Ukraine, is much less likely to lift import embargos.

While not shielded from price spikes, U.S. middle distillate supply is much less vulnerable to the ongoing disruption. Last year, crude from the Persian Gulf accounted for less than 8% of imports and 3% of domestic refiner’s inputs. The U.S. has been a net exporter of middle distillates for nearly two decades. Supply on the West Coast, where Middle Eastern crude makes up more than 11% of refiners’ diets, was more at risk, as the region lacks the infrastructure to receive fuels from other parts of the country. The recent waiving of the Jones Act, however, now effectively allows domestic shipments from Gulf Coast refineries to the West Coast and should mitigate regional supply risks – at least for the next 60 days.

CEC: California Gasoline Stocks Fall 348,000 Bbl on Week

California Energy Commission data show statewide gasoline inventories declined in the week ending March 13, as the agency now reports only statewide totals in its Weekly Fuels Report released on Friday (3/19).
Statewide gasoline stocks, including CARB reformulated, non-California, and blending components, fell by 348,000 bbl to 9.986 million bbl, and were 18% below last year.
Statewide gasoline production dropped by 127,000 bbl to 4.941 million bbl, and was 13% below last year’s levels.

CEC: California Diesel Stocks Fall 137,000 Bbl on Week

California Energy Commission data show statewide diesel inventories declined in the week ending March 13, as the agency now reports only statewide totals in its Weekly Fuels Report released on Thursday (3/19).
Statewide diesel stocks, including CARB diesel and other diesel fuel, fell by 137,000 bbl to 2.730 million bbl, and were 16% below last year.
Statewide diesel production fell by 54,000 bbl to 1.388 million bbl, and was 26% below last year’s levels.

EIA: US NatGas Storage Reports 35 Bcf Weekly Injection

Energy Information Administration data released midmorning Thursday (3/19) show a 35 billion cubic feet injection into U.S. natural gas storage to 1.883 trillion cubic feet in the week ended March 13. Natural gas in U.S. storage is 10.4% higher than last year and 2.6% above the five-year average of 1.836 Tcf.

Regionally, EIA reports the East registered a 8 Bcf injection to 302 Bcf, 1.7% more than a year ago and 10.7% lower than the five-year average.
Natural gas in storage in the Midwest decreased 1 Bcf week-on-week to 374 Bcf, a 1.9% surplus compared to the same week a year ago and 13.2% lower than the five-year average.
Mountain region natural gas in storage increased 1 Bcf, up 21.8% year-on-year to 62.1% above the five-year average.
South Central storage rose 26 Bcf to 747 Bcf, 9.2% more than in the same week last year and 3.9% below the five-year average.

U.S. Rack ULSD Extends Rally 16.56cts as Gasoline Slips

Wholesale rack prices for ultra-low sulfur diesel strengthened again Thursday (3/19), while conventional unleaded gasoline and premium grade gasoline eased across most U.S. regions, as refined product markets remained volatile amid continued concern over Middle East supply risk.

Nationwide ULSD rack prices averaged $4.0916 gallon, up 16.56cts from Wednesday’s $3.9260 gallon, according to DTN data. Conventional unleaded gasoline rack prices averaged $3.0968 gallon, down 3.83cts from Wednesday’s $3.1351 gallon. Premium grade gasoline prices were mixed to lower, with declines in most regions and only marginal gains in the Rocky Mountain market.

ULSD racks increased across all regions. The largest rise came in PADD 5, where prices climbed 20.37cts to $4.8040 gallon. PADD 3 rose 18.37cts to $4.1301 gallon, while PADD 2 increased 16.74cts to $3.7047 gallon. PADD 1 moved 14.92cts higher to $4.2882 gallon, and PADD 4 added 14.66cts to $4.1117 gallon.

Relative to the national ULSD rack average of $4.0916 gallon, PADD 5 held the strongest premium at 71.24cts above the U.S. benchmark, followed by PADD 1 at 19.66cts above the national average. PADD 3 and PADD 4 also traded at slight premiums, while PADD 2 remained the deepest discount, at 38.69cts below the benchmark.

Support for diesel values also came from broader distillate supply concerns. Europe remains reliant on imported middle distillates, leaving that market more exposed to disruptions tied to key transit routes such as the Strait of Hormuz.

On conventional unleaded gasoline racks, most regions moved lower. PADD 2 posted the sharpest decline, falling 8.81cts to $2.6487 gallon. PADD 3 decreased 3.25cts to $2.8057 gallon, while PADD 1 fell 2.31cts to $2.8472 gallon. PADD 5 edged down 0.31cts to $3.8822 gallon, while PADD 4 was nearly unchanged, up 0.04cts to $3.0300 gallon.

Compared with the national conventional unleaded gasoline average of $3.0968 gallon, PADD 5 remained the only region trading at a premium, at 78.54cts above the U.S. benchmark. All other regions held discounts, led by PADD 2 at 44.81cts below the national average, followed by PADD 3 at 29.11cts, PADD 1 at 24.96cts, and PADD 4 at 6.68cts below the benchmark.

Premium grade gasoline rack prices were lower across most regions Thursday. PADD 1 posted the largest decline, dropping 10.53cts to $3.4704 gallon. PADD 2 fell 8.91cts to $3.2234 gallon, while PADD 3 decreased 3.27cts to $3.4570 gallon. PADD 5 moved 1.69cts lower to $4.2518 gallon, while PADD 4 was little changed, up 0.01cts to $3.4585 gallon. Premiums to conventional unleaded gasoline were widest in PADD 3 at 65.13cts, followed by PADD 1 at 62.32cts, PADD 2 at 57.47cts, PADD 4 at 42.85cts and PADD 5 at 36.96cts.

In futures trading, refined products also advanced. Front-month NYMEX ULSD was at $4.4090 gallon, up 21.12cts, while front-month RBOB gasoline rose 7.56cts to $3.1741 gallon. WTI crude traded at $97.00 barrel, up 68cts, as markets continued to price in geopolitical risk and the potential for disruption to regional energy infrastructure and product flows.