The U.S. government shut down could be affecting our industry this week, specifically the release of the Department of Energy’s Petroleum Status report typically distributed Wednesday’s at 10:30am EST. Historically, when this has happened the reports have been delayed until the government re-opens. At this time there is no timetable from Congress of when they’ll reach a decision to re-fund the government and have hundreds of thousands of government employee’s return to work.
Philadelphia Energy Solutions LLC (PES) filed for Chapter 11 Bankruptcy protection yesterday. The refinery has a capacity of 335,000 barrels per day and is the largest on the East Coast. The company has secured $260 million in new financing, and still plans to operate with its approximate 1,100 person staff without any disruptions. There were many factors that contributed to yesterday’s filing. PES stated the main impetus is due to its financial woes regarding the $800 million it paid on credits to comply with the Renewable Fuels Standard. Another reason is that it once built a rail intake system to take in crude oil from North Dakota during the boom in Bakken production. However, as those favorable economics dissipated with the advent of cheap crude from West Texas, the refinery was forced to take in more expensive crude imports. Time will tell how this plays out.
For the time being, oil prices are still buoyed today, February WTI trading up a modest $0.03 to $63.40/barrel. Last week Baker Hughes reported we lost 5 oil rigs and added two natural gas rigs. This could be part of the reason hedge funds still have a record long position of 707,787 contracts as reported by the CFTC. As we’ve said before, this kind of length in the market can make prices susceptible to sharp price corrections; but the bulls remain in charge.
February RBOB is unchanged at $1.8636/gallon and ULSD is lower by $0.0142 to $2.0442/gallon.