MARKETWIRE ALERTS
Barani Krishnan
DTN Refined Fuels Market Reporter
MARKETWIRE ALERTS
MarketWire Afternoon News Aug 28th:
Updated at 5:00 PM ET
HEADLINES:
- Group 3 Jet Fuel Basis Drops 14cts, Midwest ULSD Softens
- IATA: Global Air Passenger Demand Up 0.2% in July
- Marathon Carson to Undergo a 16-Day Refinery Flaring
- EPA Grants 29 Small Refinery RFS Exemptions
- Harvest Season to Test Stressed Midwest Fuels Markets
- Big Spring Crude Unit Malfunction Triggers SO2 Release
- CFTC: WTI Bullish Positioning Edges Higher on Week
NEWS
Group 3 Jet Fuel Basis Drops 14cts, Midwest ULSD Softens
Group 3 jet fuel spot basis faced heavy selling pressure Monday (8/31)
dropping 14cts against a surging NYMEX ultra-low sulfur diesel (ULSD) futures
market to lead physical market weakness across the Midwest.
Group 3 jet fuel was talked at a discount of 55cts gallon to the October
NYMEX ULSD futures contract, widening 14cts on the day. Chicago jet fuel basis,
meanwhile, held flat at a discount of 65cts gallon to the same benchmark..
Midwest ULSD basis also faced downward pressure across major trading hubs.
Prompt Chicago ULSD basis weakened by 2cts to stand at a 16cts gallon
discount to the October NYMEX ULSD contract. Pipeline spot basis across the
Buckeye Complex and Wolverine markets followed Chicago lower, each softening by
0.5cts on the day to a 12.5cts gallon discount to the same benchmark.
Bucking the broader regional diesel weakness, the Group 3 ULSD discount
against the NYMEX benchmark narrowed by 1.75cts to 12.75cts gallon. The slight
physical firming in the Plains came as traders weighed tight localized supply
against persistent midstream disruptions.
The underlying paper market provided major tailwinds across physical hubs,
with front-month NYMEX ULSD advancing 13.86cts to settle at $4.4953 gallon. The
surge came despite weekly supply figures from the U.S. Energy Information
Administration, which showed PADD 2 distillate fuel oil inventories rose by
200,000 bbl to 28.6 million bbl during the week ended August 21.
Regional jet fuel stocks also expanded, rising by 100,000 bbl on the week to
reach 8.1 million bbl. That build positions Midwest jet inventories 600,000 bbl
above year-ago levels.
IATA: Global Air Passenger Demand Up 0.2% in July
Global air passenger demand edged up 0.2% year on year in July, marking a
modest rebound for the peak Northern summer travel season despite ongoing
headwinds from high fuel costs and Middle East tensions, the International Air
Transport Association (IATA) reported Monday (8/31).
Total passenger demand, measured in revenue passenger kilometers (RPK),
improved from June's 1.7% decline, while capacity rose 0.3%, bringing the
global load factor to 85.2%, IATA said.
North American carriers saw international demand fall 2.3% from a year
earlier as capacity dropped a matching 2.3%, keeping the regional load factor
flat at 88.2%.
Domestic markets showed mild growth overall, with total domestic RPK rising
0.6% in July. U.S. domestic traffic fell 0.5%, while China led major domestic
expansions with a 5.3% gain.
Middle Eastern carriers continued to weigh on overall traffic, though their
demand decline moderated to 10.0% in July compared to double-digit plunges
recorded earlier in the year.
IATA Chief Economist Marie Owens Thomsen noted that despite high fuel costs
and economic uncertainty, carriers remain confident for late 2026, pointing to
a planned 3% seat capacity expansion in September.
International passenger traffic edged down 0.1% year on year in July, though
excluding Middle Eastern airlines, global international travel grew 1.5%.
Marathon Carson to Undergo a 16-Day Refinery Flaring
Marathon Petroleum has scheduled two planned flaring events beginning
Tuesday (9/1) at its 365,000 bpd Carson refinery, according to filings
reported Monday (8/31) with the South Coast Air Quality Management District
(SCAQMD).
The first event is scheduled from 11:00 a.m. PT on Tuesday September 1
through 12:00 p.m PT September 15. The second is scheduled from 11:00 p.m PT
September 1 through 12:00 p.m. PT September 16.
The filings did not identify specific processing units involved or indicate
whether refinery production would be affected.
The Carson facility is part of Marathon's Los Angeles refinery complex and
processes crude oil into intermediate and unfinished products that are
transferred to the Wilmington facility for further processing.
The Los Angeles refinery produces gasoline, diesel and other refined
products for the U.S. West Coast market.
DTN reached out to Marathon Petroleum for additional details on the planned
activity and potential operational impacts but did not get an immediate
response.
EPA Grants 29 Small Refinery RFS Exemptions
The Environmental Protection Agency (EPA) on Monday (8/31) granted full or
partial Renewable Fuel Standard exemptions to 29 small refineries for the 2025
compliance year, removing an estimated 1.76 billion Renewable Identification
Numbers (RINS) from their renewable volume obligations.
EPA granted 18 full exemptions and 11 partial exemptions covering 50% of RFS
obligations, while denying three petitions and determining two others were
ineligible. The agency acted on 34 petitions from 34 refineries after
consultation with the Department of Energy and review of refinery-specific
economic factors.
Among the full exemptions were Alon USA, Calumet Shreveport Refining, Delek
Refining, Hunt Refining, United Refining and Wynnewood Refining. Phillips 66
Montana, Marathon Mandan and several HF Sinclair refineries received partial
exemptions, while American Refining Group, Ergon-West Virginia and HF Sinclair
Woods Cross were denied. HF Sinclair Artesia Refining and Vertex Energy were
found ineligible.
For refineries that have already retired RINs to satisfy their 2025
obligations, EPA said it will return the corresponding credits. Refineries
receiving partial exemptions will have half of their retired RINs returned. EPA
said returning existing credits rather than generating new RINs is intended to
limit disruption to the RIN market.
Affected refineries must submit revised compliance reports by October 1,
2026, RFS compliance deadline. EPA said the decisions are final agency actions
and became effective immediately upon issuance.
Harvest Season to Test Stressed Midwest Fuels Markets
Heavy agricultural demand for the upcoming Midwest harvest is set to
severely test a regional fuel distribution network already mired in midstream
outages, constrained refining capacity and lack of backup supply from the Gulf
Coast.
With oncoming agricultural works signaling more diesel consumption, Midwest
distillate inventories stood at a tight 28.6 million bbl as of the week ended
August 21, according to Energy Information Administration data.
Complicating matters is idling of the 1,830-mile Explorer Pipeline carrying
fuel northward into PADD 2 from the Gulf Coast -- an outage persisting since an
August 17 explosion and fire at its Glenpool, Oklahoma tank farm hub.
The lack of a substantial supply cushion leaves regional basis bids acutely
vulnerable to price spikes at the exact moment that field equipment and heavy
transport fleets require maximum volume.
So far in August, Chicago ULSD spot prices jumped 13.7% to $4.0254 gallon
from July levels, while for Group 3 ULSD spot prices surged 11.8% to $4.0509
gallon, underscoring the severe monthly cost inflation facing physical buyers,
DTN data showed.
A Midwest fuels trader told DTN that the market's physical tightness emerged
well before the mid-August supply disruptions. Pre-harvest markets typically
build an inventory buffer in anticipation of peak agricultural burn.
"If anything, there should be a supply carry heading towards September," the
trader said. "We didn't see that happening, and we're closing in on the meat of
harvest season in the coming weeks."
The absence of a market carry signals that the midstream bottleneck at
Explorer could place far greater pressure on Midwest refiners to meet surging
harvest demand.
Even with refinery runs averaging 4.21 million bpd for August at an average
run rate of 98.6%, recent EIA data shows regional distillate production topping
out at 1.29 million bpd. That is against peak harvest distillate demand,
estimated by analysts at 1.40 million bpd.
"Reading between the lines, it appears that people in the Midwest are not
putting out enough product, despite refinery runs being this high," the trader
noted, adding that the absence of Gulf Coast backup supply further imperiled
the situation.
Big Spring Crude Unit Malfunction Triggers SO2 Release
Delek US Holdings has reported an emissions event at its 75,000 bpd Big
Spring Refinery in Big Spring, Texas, following an equipment malfunction at the
facility's crude unit, a filing with the Texas Commission on Environmental
Quality said.
The event occurred between 6:42 a.m. and 6:42 p.m. CT on Sunday (8/30),
according to the filing Monday (8/31).
The malfunction resulted in sulfur dioxide emissions exceeding reportable
limits, with an estimated 1,745 pounds released through the crude flare.
Operators reduced rates to minimize emissions during the event, the filing
added.
The refinery primarily produces gasoline, diesel and jet fuel.
DTN reached out to Delek US for additional details but did not get an
immediate response.
CFTC: WTI Bullish Positioning Edges Higher on Week
Money managers increased their bullish positioning in NYMEX West Texas
Intermediate (WTI) crude during the week ended August 25, with net longs rising
for a second consecutive week as an increase in long positions outpaced growth
in shorts, Commodity Futures Trading Commission (CFTC) data released Friday
(8/28) showed.
Noncommercial long positions in WTI held by money managers increased by
3,084 contracts to 323,243 during the reference week, according to the weekly
Commitment of Traders data released by the CFTC.
Noncommercial short positions rose by 1,725 contracts to 199,794 during the
same week, the CFTC data showed.
This caused the net noncommercial long position in WTI to increase by 1,359
contracts to 123,449. Open interest, meanwhile, rose by 17,780 contracts to
1,906,740.
Noncommercial spread positions in WTI increased by 17,835 contracts to
616,707 during the same week.
Total long positions in WTI futures rose by 18,242 contracts to 1,832,094,
while total short positions increased by 20,042 contracts to 1,864,891.
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