Philadelphia Energy Solutions (PES) announced the closing of their doors a couple of weeks ago, but there was, and still is, a lot of uncertainty for what that means for the future of the union workers and the physical plant itself. PES recently announced its commitment to extend pay for union workers through August 25th, according to StateImpact Pennsylvania. U.S. Senator Bob Casey and PES representatives have confirmed that PES will pay its workers through the expiration of their collective-bargaining agreement. While the unions are holding on to hope that parts of the refinery will remain open or sell to a new operator quickly, it seems increasingly unlikely that will happen.
Analysts are getting increasingly worried that the refining industry will not be prepared in time to meet the lower sulfur regulation under the new International Maritime Organization (IMO) set to begin January 1, 2020 and will subsequently increase diesel prices in relation to crude oil.
Across North America, temperature fluctuations, refinery turnarounds, and pipeline disruptions have created supply challenges getting petroleum to market. When refineries shut down for maintenance there is always a potential for a supply shortage in the effected markets, couple that with increased demand due to weather and all of a sudden a long (plenty of product) market becomes a short (scant amounts of product) market.
After a sharp rally to begin the year, oil prices have been trading in a tight range over the past two weeks and are waiting for their next cue to determine price direction.
Earlier this week the EIA stated that oil terminals on the Texas Gulf Coast exported more crude oil than they imported in April of this year; surpassing imports by 15,000 bpd. A month later, the spread between imports and exports in Texas widened to 470,000 bpd which contributed to the U.S.’ record setting crude oil export total of 2 million bpd. The Texas gulf coast had previously been credited with approximately half of the United States’ crude oil exports until this upsurge, bringing the area’s contribution up to 70% in May of 2018.
The oil market is rallying today primarily because of a sizable crude oil draw reported by the DOE, a softening dollar, and bullish OPEC comments.
Commodity and global equity markets got smoked yesterday due to a surge in the U.S. dollar index which was perpetuated by fears of Turkish contagion and a surprise build in crude oil inventories.