MARKETWIRE ALERTS
Miguel E. Andujar
DTN Refined Fuels Market Reporter
MARKETWIRE ALERTS
MarketWire Afternoon News July 27th:
Updated at 5:00 PM ET
HEADLINES:
-- Midwest CBOB Basis Hits 2-Month High
-- Midwest ULSD Basis Spike Following Cycle 1 Roll
-- Baker Hughes Q2 Profit Falls on Wells Revenue
-- Analysis: Extended Russia Ban Lifts USGC, Midwest Margins
-- EIA: Hybrids Rise, BEV Sales Fall Post-Credit Expiry
-- Phillips 66 Reports 48-Hour Emissions at Sweeny Refinery
-- ExxonMobil Reports Flaring at Baytown Olefins Plant
NEWS
Midwest CBOB Basis Hits 2-Month High
Midwest CBOB cash basissurged Monday (7/27), pushing spot premiums to more
than two-month highs and counteracting a sharp decline in underlying
front-month NYMEX RBOB futures.
Chicago CBOB was heard talked at an 8.25cts premium to the September NYMEX
RBOB contract, strengthening 25.25cts on the day.
DTN pricing data showed it was the highest premium against NYMEX RBOBsince
May 13, when it last traded at an 8.5cts premium.
Front-month NYMEX RBOB futures fell 6.86cts Monday to settle at $3.3273
gallon as crude and refined products tumbled across the board following a pause
in U.S.-Iran hostilities.
Pipelines in nearby distribution channels tracked the physical gain. Buckeye
and Wolverine pipeline CBOB differentials widened 23.75cts on the day to an
8.25cts premium over NYMEX RBOB futures.
The cash market strength reflects tight underlying spot availability across
the Midwest, even as high regional refinery processing rates continue.
According to the U.S. Energy Information Administration, PADD 2 refinery
utilization reached 100.3% in the week ended July 17.
Midwest ULSD Basis Spike Following Cycle 1 Roll
Midwest spot diesel and jet fuel cash discounts narrowed Monday (7/27),
mitigating a steep selloff in NYMEX ULSD futures on the first day of Cycle 1
scheduling window for August pipeline deliveries.
Chicago ULSD was talked at a 30cts discount to the NYMEX August ULSD
contract, narrowing 19cts on the day. The firmer basis helped cushion local
spot prices against a 6.9cts drop in front-month NYMEX ULSD futures to a
settlement of $4.1116 gallon following a broad liquidation in energy markets.
The start of the Cycle 1 nomination and trading cycles across regional
pipeline networks prompted market participants to re-align cash differentials
to reflect fresh August delivery commitments.
Physical markets also strengthened was also evident in regional jet fuel and
key pipeline-connected locations. Chicago jet fuel basis narrowed by 30cts on
the day to a 55cts discount to August ULSD.
Meanwhile, Buckeye and Wolverine pipeline ULSD differentials narrowed 17cts
to a 30cts discount to the underlying futures benchmark.
The underlying strength in Midwest physical cash differentials follows
strong gains last week, when Chicago ULSD rose 26.56cts to a weekly average of
$3.6619 gallon.
Regional refined product markets continue to draw support from tight
inventory levels, with PADD 2 distillate stocks falling 300,000 bbl to 28.6
million bbl in the week ended July 17, according to the U.S. Energy Information
Administration, despite regional refinery utilization reaching 100.3%.
Baker Hughes Q2 Profit Falls on Wells Revenue
Baker Hughes reported on Monday (7/26) lower second-quarter earnings as
weakness in its wells business continued to weigh on results despite stronger
activity late in the quarter.
Revenue from the company's well construction business fell 2% year over year
to $899 million from $921 million, contributing to a 5% decline in oilfield
services & equipment (OFSE) revenue to $3.45 billion, reflecting the impact of
disruptions in the Middle East.
Despite the decline, Baker Hughes said well construction activity improved
sequentially, with revenue rising 7% from the first quarter, supported by
increased activity in the Middle East, North America and Latin America.
The company also secured major well construction contract extensions with
Petrobras in Brazil, Equinor in Norway and oil and natural gas corporation of
India during the quarter.
Analysis: Extended Russia Ban Lifts USGC, Midwest Margins
Russia's decision to extend its ban on gasoline exports through year-end
deepens the support for U.S. refining margins, as a global deficit in finished
motor fuels leaves international buyers scrambling for U.S. gasoline.
Ukrainian drone strikes have inflicted operational damage on Russia's
processing network, forcing Moscow into emergency export curbs that are
reshaping global trade channels. While Russian Deputy Prime Minister Alexander
Novak signaled over the weekend that Moscow intends to lift its temporary
emergency ban on diesel exports once domestic supply stabilizes, local gasoline
shortages mean the embargo on Russian gasoline will stay through the end of
2026.
Aside from wars disrupting Russian and Middle East refinery operations, a
four-month refining lull in Asia has contributed to supply tightness, noted DTN
analyst Karim Bastati.
"The global fuels market has been in a prolonged steep deficit as evidenced
by months of plummeting inventories and surging refining margins," Bastati
said. "While global refining rates are rebounding, fuels demand is set to rise
seasonally, meaning that the fuels market is likely to stay tight."
Export Pull
To refiners on the Gulf Coast and Midwest, what this means is a window of
greater opportunity over at least the next five months for U.S. gasoline that
translates into higher margins for the product. It will also result in tighter
domestic supply, likely keeping the U.S. pump price above or near $4 a gallon,
a key level already established from crude supply disruptions caused by the
Iran war.
Refiners on the West Coast will miss out though, as geographic and
logistical constraints prevent gasoline produced in PADD 5 from being shipped
out to Atlantic Basin buyers.
With Gulf Coast refinery utilization running near maximum capacity at 96.1%,
U.S. finished gasoline exports recently hit a record 4-week average of 1.03
million bpd, according to data from the Energy Information Administration.
Operators in the PADD 3 region are already maximizing waterborne exports to
capture lucrative international netbacks. Instead of moving north along the
TEPPCO or Explorer pipeline systems to cushion Midwest distribution nodes,
prompt Gulf Coast product batches will be diverted to maritime export terminals.
Cash markets in the Midwest will be forced to operate without coastal
backup. With national distillate inventories remaining more than 4.5 million
bbl below five-year seasonal averages, physical traders in the PADD 2 region
must defend regional stock levels through elevated spot basis bids.
The supply vacuum has already pushed domestic processing economics to
historical highs. 3:2:1 crack spreads have surged past Ukraine-invasion highs
to more than $67 bbl vs WTI and $61 bbl vs Brent, and Gulf Coast ULSD crack
futures hold firm near $58 bbl for late summer delivery.
With landlocked access to 2.75 million bpd of heavy Canadian crude, Midwest
refiners sit on a privileged feedstock advantage. As long as transatlantic
export arbs keep Gulf Coast barrels moving offshore, PADD 2 operators are
likely to maintain structurally protected margins through year-end.
EIA: Hybrids Rise, BEV Sales Fall Post-Credit Expiry
Hybrid electric, battery electric, or plug-in hybrid electric vehicles
accounted for 24% of new light-duty vehicle sales in the United States in the
second quarter, up 22% from a year earlier, according to a U.S. Energy
Information Administration report released on Monday (7/27).
The increase was driven entirely by hybrid electric vehicles, which
accounted for a record 16% of light-duty vehicle sales, the report said, citing
data from Omdia.
Battery electric vehicles accounted for 6% of new light-duty vehicle sales
in the second quarter, down from 7% a year earlier. Plug-in hybrid electric
vehicle sales fell from 1.9% to 1.4% over the same period. Both declines follow
the September 30 expiration of two federal tax credits -- the New Clean Vehicle
Credit and the Qualified Commercial Clean Vehicle Credit -- which applied to
the purchase or lease of new electric vehicles.
Battery electric vehicles made up a record 12% of light-duty vehicle sales
in September, immediately before those credits expired, according to the report.
Despite recent gains in electric vehicle sales, the share of the total U.S.
light-duty vehicle fleet remains small. In 2024, electric vehicles accounted
for 2% of all registered light-duty vehicles in the United States, reflecting
how slowly new-vehicle sales figures translate into fleet-wide change against a
fleet of nearly 290 million registered vehicles.
Phillips 66 Reports 48-Hour Emissions at Sweeny Refinery
Phillips 66 reported a 48-hour flaring event its 277,000 bpd Sweeny Refinery
and Petrochemical Complex caused by a process upset, according to a filing with
the Texas Commission on Environmental Quality.
The incident began at 1:53 p.m. CT on Friday (7/24) and ended at the same
time on Sunday (7/26), the filing showed.
A process upset in Unit 26.2 triggered excess flaring across multiple
emission points, including the Coker Flare, Flares 16, 17, and 19, and Flare
11. A sixth emission point, Unit 27.1, recorded excess opacity of nearly 87% --
more than four times the permitted 20% limit.
The most substantial release occurred at the Coker Flare, where sulfur
dioxide emissions reached approximately 31,966 pounds over the event's
duration, far exceeding its authorized limit of 4.56 pounds per hour. Propylene
releases at that flare totaled 793 pounds, while nitrogen oxides reached 714
pounds and hydrogen sulfide 347 pounds.
Across all flare points combined, sulfur dioxide totaled more than 33,100
pounds. Other released compounds included isobutylene, propylene, cis-2-butene,
and trans-2-butene, all classified as volatile organic compounds.
According to the filing, operations personnel worked to stabilize Unit 26.2
and return it to normal conditions. The event was noted as ongoing at the time
of reporting.
The Sweeny Refinery and Petrochemical Complex is one of the largest refining
and petrochemical facilities in Texas. It processes a wide range of crude oil
grades and primarily produces gasoline, diesel, jet fuel and petrochemical
feedstocks.
ExxonMobil Reports Flaring at Baytown Olefins Plant
ExxonMobil reported a nearly four-hour emissions event at the olefins plant
at its 588,000 bpd Baytown refinery, releasing 14 air contaminants through
three flare systems, according to a filing with the Texas Commission on
Environmental Quality.
The incident began at 1:07 a.m. and ended at 4:59 a.m., according to an
initial report filed on Thursday (7/23). The company attributed the incident to
a temperature control malfunction in the facility's Demethanizer Tower (MT01),
which triggered the safe utilization of the plant's flare system.
Emissions were released through three points: the BOP-X Flare, the Primary
Flare, and the Secondary Flare, located in the Base BOP Cold Ends process area.
The largest quantities released were ethylene -- totaling nearly 1,573
pounds across all three flares -- followed by carbon monoxide at roughly 2,123
pounds and nitrogen oxides at approximately 367 pounds combined. Benzene
releases totaled about 64.76 pounds facility-wide. A portion of the emissions
exceeded permit authorization levels.
ExxonMobil stated that operational adjustments were made to stabilize
operations and that fenceline monitoring indicated no adverse environmental
impact to the surrounding community. The company added it expects minimal
production impact and anticipates meeting contractual commitments. The incident
remains listed as open.
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