Take out some refinery production in the US amidst weak global demand for distillates, and what happens? The RBOB gasoline crack — the US benchmark measure of the difference between the price of crude and that of gasoline — strengthens to the point it’s trading at par with heating oil.
As JBC Energy note on Tuesday that’s actually a highly unusual situation for the time of year. As they explain:
In the course of the past week the Nymex RBOB crack has strengthened considerably, moving up to almost $6 per barrel, and drawing even to Heating Oil.
At this time of the year the heating oil crack is normally at a premium to gasoline. Demand in the US and Europe has yet to show signs of a recovery with US consumption some 11% (4-week average) lower year-on-year (EIA) while we see European demand declining by 1.6% this year. Meanwhile international stock levels remain at very high levels, with latest inventory data showing ARA stocks about 60% higher than the 5-year average at some 20.8 million barrels, while in the US distillate stocks are a massive 41% above seasonal levels.
Here, meanwhile, is how the chart looks:
The Daily Mail discovers contango – FT Alphaville
The GOD (glut of distillate) delusion – FT Alphaville
Oil, still fundamentally weak – FT Alphaville
Demand is in the toilet – FT Alphaville