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’Crackageddon
The justification for Wednesday’s commodity rout is still that RBOB futures fell (or crashed) after the EIA reported larger than expected US stockbuilds in gasoline. The more than 8 per cent move, in the usually much more stable contract,
Commodity rout – Mark 2
Right…
So here’s the story.
After dumping last week, silver staged a rather spectacular recovery over the current week. It was led in part by a major inflow of fresh money into silver exchange traded funds…
There’s no change for the US driver…
… because the gasoline crack (the difference between the price of crude and the price of gasoline — a key metric in determining whether there’s enough incentive for a refinery to process crude) is roofing.
There’s always a silver lining…(even in a commodity rout)
And on Thursday that lining was apparent in the gasoline market.
As Stephen Schork of the Schork Report noted on Friday:
You know it has been a bad day when a 6.84 per cent drop can be described as the best performance of the complex,
The problems with fuel consumption data
John Kemp has an excellent column out Wednesday on the latest auto sales data, emphasising that buyers of US cars are increasingly shifting towards compact, fuel-efficient vehicles, and pointing to recent analyses arguing that $4 gas won’t reduce demand the way it did in 2008,
Chinese fuel publicity stunts in action?
There are ongoing reports of fuel shortages across northern Japan.
However, as we pointed out previously, Japan’s inventory stock is actually pretty well positioned to deal with these sorts of shortages.
WTI arbitrage is a PADD II windfall
There’s been some interesting commentary on Friday regarding the ongoing problem of the widening WTI- Brent spread, which struck a record wide in like-for-like basis terms on Thursday.
First this from John Kemp at Reuters,
A gasoline snow print
Everyone loves a snow day.
And recent snowfalls across North America, it seems, have provided many with an excuse to take one. (That is, to stay at home for the day rather than to go to work or school.)
The stay-at-home trend has been so significant,
On the implications of a widening WTI-Brent spread
The spread between the two main global oil benchmarks, West Texas Intermediate and Brent, is blowing out (again). And it’s been doing so for most of the month.
We’ve known for a long time, of course,
Nobody ❤ gasoline
Could it be that nobody in the US wants gasoline anymore?
On Wednesday, John Kemp of Reuters observed how the combined stock of crude oil and refined products in commercial storage around the US had surged to 1.130bn barrels — the highest level since weekly records began in 1990.
Gasoline vs bimbos with big hair
We didn’t say that..
Stephen Schork of the daily energy Schork report did. And here’s the graph, charting exactly that. Gasoline versus err, bimbos, by which he actually means entertainment spending in the US as a percentage of total consumption expenditure (the reference is to Snooki in case you’re really curious):
Chart du jour, commodity speculator edition
The ever watchful Sean Corrigan at Diapason Commodities drew our attention on Monday to the state of outright net speculative length in crude products on the Nymex.
Here’s the chart:
The chart shows the value of all net speculative length in crude-related products on the Nymex charted against combined implied daily demand.
Refinery slowdown, China edition
Vienna-based energy consultants JBC Energy have turned our attention to an interesting story on Friday.
According to Reuters, Chinese refineries will be scaling back crude runs by a sizeable 5.6 per cent in March.
Total refinery strike down *alert*
Here’s a story that’s currently topping the minds of most energy traders in Europe, via Bloomberg:
Feb. 22 (Bloomberg) — Total SA unions called for a refinery strike to spread to all French plants and said fuel shortages could be imminent.
US petroleum stocks fit for bursting
Weekly US energy inventory data release on Wednesday confirmed the unbelievable. US petroleum stocks rose in the week despite especially cold weather in the region during the period.
Meanwhile, Dennis Gartman of the Gartman Letter draws attention to the fact that aggregate inventory rose by 8.9m barrels,
A Q4 refining headache for the oil majors
Shares in Royal Dutch Shell took a bit of a walloping on Wednesday as reports circled the city the company was guiding analysts lower on fourth-quarter numbers:
The reason for the move was seemingly a worse than expected performance in Shell’s downstream and gas operations in the period.
Oil breaks
WTI crude was trading sub $70 per barrel on Monday, a move which solidifies its breakout from a recent $70-80 trading range.
The big question facing the market now is whether prices will continue to trend lower ahead of the holidays,
Energy irony
As FT Alphaville reported, a number of US refineries have had to mothball plants in the last month due to poor product margins. Ironically, this action may now be beginning to boost product cracks (the difference between crude and product prices and what determines refinery profitability).
Gasoline cracks are strengthening
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.
Why refinery shutdowns matter
Last Friday, what many in the energy market had long suspected might happen, happened.
Valero, the largest independent refiner in the US, was forced to close another 200,000-plus barrel-per-day refinery — this time,
Daily Mail tanker outrage! (Day 2)
It’s day two of the Daily Mail’s campaign against tankers parked off the British coast. In case you missed “how the Daily Mail broke the story yesterday” you might care to check out FT Alphaville’s coverage here.
Pumping down the gas
It appears there’s nothing like a a financial crisis to change a nation’s attitude towards driving and gasoline expenditure.
Note, for example, the following chart from Harry Tchilinguirian at BNP Paribas on Monday:
Over tanked in oil
Hat tip to Morgan Downey, author of Oil 101, for the following chart reflecting the still ongoing over-supply issues facing energy and tanker markets.
Related link:
Tanked – FT Alphaville
BP results, ‘demand is in the toilet’ edition
From BP’s Q2 results on Tuesday:
Indicator refining margins in the third quarter to date have been lower than in the second quarter and substantially below 2008 levels. Refining availability is expected to remain higher than in 2008,
The Eurobob effect
Here’s a funny one, just when crude fundamentals actually turn somewhat bullish, what does the price of crude do on Monday? It falls.
So what is going on? A lot of it probably lies in the realms of the gasoline market.
Is floating storage being restocked?
EIA stock data is out:
All of the above suggests one thing to us: floating storage may have been restocked last week and not – as some reports have suggested – offloaded due to a dissipating contango.
Distillate weakness driving gasoline strength
Francisco Blanch, commodities strategist at Merrill Lynch, observes in a recent note to what extent the distillate overhang has now ironically become the primary driver of gasoline strength, and to what degree refineries are switching over to gasoline-max mode to try and make-up for the shortfall:
‘Demand is in the toilet’
Stephen Schork of the Schork Report sums up the energy demand picture in the US succinctly on Thursday:
So there you go, refiners did not make a lot of product last week because demand is in the toilet.
Gasoline in severe backwardation
Here’s the front end of the forward curve for both Nymex gasoline and heating oil futures.
As can be seen gasoline is now severely backwardated at the front-end of the curve, while heating oil futures (aka distillate) are still firmly holding on to contango.
Tanked
Most people will have heard about the dramatic collapse in dry bulk shipping rates that occurred in October/November following the paralysis that hit global trade in the weeks after the Lehman Brothers collapse.