Andy Lebow has been talking about this for a few months in our podcasts, that distillates stocks are tight relative to gasoline… The EIA has a nice piece in “Today in Energy”, here, highlighting the relative prices of gasoline and distillates:
“This year, however, gasoline futures prices have been lower than distillate futures prices in both April and May for the first time since 2013. The front-month futures price of reformulated blendstock for oxygenate blending (RBOB, the petroleum component of gasoline used in many parts of the country) was on average 2 cents/gal lower than the front-month futures price of ultra-low sulfur diesel (ULSD) in April. In May, the RBOB front-month price traded on average 3 cents/gal lower than the ULSD front-month price.
Although U.S. gasoline product supplied and gross exports together are estimated to be about 2% higher so far this year compared with 2017, U.S. gasoline inventories have remained higher than their previous five-year averages for most of 2018. Higher inventories have affected gasoline’s value relative to distillate and gasoline’s value relative to crude oil (known as the crack spread). The RBOB-Brent crude oil crack spread averaged 34 cents/gal in April and 35 cents/gal in May. The last time the RBOB-Brent crude oil crack spread was lower for either month was in 2012.”
“Factors affecting the distillate market may also explain why gasoline futures prices have been lower than distillate futures prices. Colder-than-normal weather lasted through April in parts of the United States, which led to higher heating oil consumption. Relatively high economic growth and rising oil and natural gas drilling activity could also be contributing to growing U.S. diesel demand and higher ULSD prices.”
Here is the July futures RBOB/HO spread chart from barchart.com:
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