Published on Wednesday, June 18 2025
Authors : Tom Kloza tkloza@turnermason.com

“Sizzle Then Fizzle” 

May Be the Appropriate Summer Energy Couplet

It’s hard to remember an energy market run-up to a summer solstice that is more dynamic or volatile than the 2025 version. Missiles are flying in the Middle East, massive worries about the global economic environment, and fickle sentiment twists thanks to the still looming possibility of a trade war. All these factors have combined to trigger some of the wildest energy price volatility since 2022 during the first few months of the Ukraine War.

Several late spring futures’ sessions on CME and ICE have produced $8/barrel or greater trading ranges for crude oil benchmarks. Put another way, a truly prescient trader could generate more than $8,000 on a day trade with a single futures’ contract if indeed they calculated direction impeccably.

In the aggregate, the market has delivered wild mood swings that see the sentiment pendulum swinging wildly between “unsafe to buy” and “not safe to sell.”  Most of the daily scrutiny has focused on violence occurring in Middle Eastern E&P geography, perhaps masking some other trends that might influence this summer’s price movements for gasoline, diesel, and jet fuel.

Incidents at refineries have also been in the news, but various processing problems represent a media undercard to the main event of Middle East warfare. There is a lot to discuss on the refining front.

In North America, we are about 100 days removed from the closure of the 260,000 b/d Lyondell refinery in Houston, and perhaps 60 days away from beginning the orderly shutdown of Phillips 66’s 139,000 b/d Los Angeles refinery (P66 has indicated a complete shutdown by Q4 2025).   The good news on the supply front comes via confirmation that most of the major spring turnaround work has been concluded. Last week, for example, saw maintenance finish up for Flint Hills’ 350,000 b/d Corpus Christi, TX facility as well as at BP’s 250,000 b/d refinery in Cherry Point, Washington.

An incident last Saturday might just be a lynch pin for how U.S. refining performs this summer. The largest refinery complex in the United States – the 631,000 b/d Marathon facility at Galveston Bay, TX – saw damage to a 140,000 b/d FCC unit, as well as a 115,000 b/d FCC hydrotreater. The fire was clearly significant and led to a temporary shelter-in-place order, but it wasn’t known whether repairs might take weeks or months.

Galveston Bay represents more than 6% of U.S. Gulf Coast refining output. The Energy Information Administration still counts the idle 268,000 b/d Lyondell Houston plant in its database, and the two facilities account for over 9% of PADD 3’s 10.056-million b/d capacity. (Lyondell will be removed in a future report, so actual capacity is even lower.)

(Editor’s Note: The June 18 EIA report was based on a survey that preceded the event at Galveston Bay. The report showed a 217,000 b/d drop in US refinery runs, including a 221,000 b/d decline in PADD 3.)

Two years ago, the entire summer was impacted by a Galveston Bay fire that killed one employee and injured others in mid-May. The blaze temporarily knocked out an Ultraformer that produces high octane components. Due to that incident and a cluster of summer 2023 refinery burps, blips, and hiccups, most U.S. gasoline markets were delicately balanced in July, August, and September 2023, and gasoline margins for refiners were robust.  

In contrast, refinery operations last year were relatively smooth with no major incidents and a midsummer processing peak of just under 17.5 million b/d. (Total input at press time was 17.364 million b/d). Ultimately, gasoline margins slipped close to break-even levels by autumn at the Gulf Coast.

On an outright basis, prices for crude oil and refined products may continue to be tied to events in the Middle East. The consensus view among nearly all energy think tanks holds that near-term crude prices will be substantially higher than what benchmarks fetch in Q4 and all of 2026. Forward curves have built in a $7/bbl slide between now and March 2026. If the most recent reckonings of supply and demand balances are correct, those curves may be understated. An analysis by JP Morgan last weekend, for example, projects an oil surplus of 2.9 million b/d in September that will eventually swell to 4 million b/d next March.

Crude will command the headlines, but here are some trends to watch in the summer 2025 refined products’ markets:

	–		The big three – gasoline, diesel, and jet fuel – should all fare better than crude oil in the next 90 days or so. Of the three, gasoline’s hold on stability is the most tenuous thanks to flat demand as well as the availability of cheap components this summer and fall.
	–		Regionally, much of the Midwest may see the most significant margin compression. The June rally in crude has been uneven, with Brent/WTI benchmarks up $13-$14/bbl versus outsized gains of $15-$18/bbl for heavy sour Canadian crude. The discount for Western Canadian Select has narrowed to less than $9/bbl in Alberta, compared with $13-$14/bbl discounts in April and May.
	–		We do not agree with media predictions of a broad summer gasoline price spike. That might only happen if a major hurricane impacts Texas or Louisiana in July/August. The median gasoline price may stay close to $3/gallon, and the national average could wobble between $3.10 and $3.25/gallon.
	–		Trader tendencies to ride favorite seasonal templates may have a sharp impact on prices. A growing preferred play is to go long ULSD and short RBOB in the second half of 2025. The popularity of that trade may lift distillate pricing worldwide, and it’s almost certain that subpar distillate inventories will remain a backdrop through year’s end.
	–		The improved refining margins for diesel and jet fuel will provide plenty of motivation to run at high rates. Minimal discounts (about $5/bbl at press time) for heavy sour crude may ensure that runs will be tilted toward light sweet grades that produce plenty of gasoline and other light ends. Economics also point to plentiful gasoline.
	–		Forget about PEMEX’ Dos Bocas refinery providing any on-spec gasoline or diesel for U.S. and Latin American markets this summer. The 650,000 b/d Dangote refinery in Nigeria will, however, have an impact. They are currently producing the occasional gasoline parcel that can be marketed in the U.S., provided sulfur credits are procured. Dangote’s output is also crowding out European gasoline that might normally be destined for West Africa. Gasoline imports have outpaced gasoline exports of late.
	–		Don’t ignore the drone attacks in eastern Europe. They have become routine, but this year has routinely seen the impacts alter more than 5% of Russian product exports. The technology is in its infancy according to most estimates so lower altitude surveillance is a must.